A company pays dividends from its earnings, making dividends sustainable only as long as the company is profitable. Over the past 5 months, Indian stock markets have experienced a significant downturn due to weak quarterly earnings, geopolitical tensions, and other factors.
With Trump’s tariff imposition and growing uncertainty, markets may see further declines. However, investors often turn to dividend stocks during such uncertain times for stable and consistent returns.
Dividend investing is a time-tested strategy, with several studies indicating that dividend-paying stocks outperform non-dividend stocks in the long term. Typically, these stocks pay regular dividends and increase them annually, earning them the title of “Dividend Aristocrats.” These stocks are considered fundamentally strong, stable, and possessing good growth potential.
In this article, we compare Vedanta and Hindustan Zinc, 2 prominent dividend-paying stocks, to determine which offers better value for investors.
Business Overview
Hindustan Zinc
Founded in 1966, Hindustan Zinc is the world’s second-largest integrated zinc producer and third-largest silver producer. A subsidiary of Vedanta Limited, it dominates the zinc, silver, and lead industries.
The company is self-reliant in terms of power, with captive thermal power plants ensuring lower operational costs. Backward integration through power production and access to low-cost, high-grade zinc reserves strengthen its business model.
Manufacturing Capacity
Hindustan Zinc has a metals production capacity of 1.12 million tonnes (MT) and an ore production capacity of 16.52 MT. It also operates a captive power capacity of 603.1 MW.
Its integrated zinc-lead-silver operations include:
- Zinc smelting capacity of 913,000 tonnes per annum (TPA)
- Lead smelting capacity of 210,000 TPA
- Silver production capacity of 800 TPA
Revenue Distribution
Hindustan Zinc generates 75% of its revenue from India, with the remaining 25% coming from exports.
Vedanta
Vedanta is a diversified natural resource company engaged in exploring, extracting, and processing minerals, oil, and gas.
The company is a major producer of zinc, lead, silver, copper, aluminum, iron ore, nickel, and oil & gas. It holds a near-monopoly in certain sectors, being India’s only nickel producer, one of the country’s largest private crude oil producers, and one of its largest iron ore miners.
Manufacturing Capacity
Vedanta has a significant presence in multiple industries with:
- Aluminium production of 2.4 MTPA
- Iron ore production of 5.6 Dry Metric Tonnes (DMT)
- Steel production of 3.5 MTPA
- Ferro alloys production of 80 kilo tonnes (KT)
- Copper production of 141 KT
- Power generation capacity of 11 gigawatts (GW)
Global Presence
Vedanta has operations across India, Namibia, South Africa, UAE, Australia, and Ireland.
Beyond mining and metals, Vedanta has expanded into commercial power generation, steel manufacturing, port operations in India, and glass substrate manufacturing in South Korea and Taiwan.
Market Cap Comparison
Hindustan Zinc has a market capitalisation of ₹1,802.5 billion, while Vedanta stands at ₹1,712.9 billion.
Market Share Leadership
Hindustan Zinc commands a 75% market share in zinc production in India, while Vedanta holds a 45% market share in aluminium production. Since Vedanta owns a controlling stake in Hindustan Zinc, it indirectly dominates the zinc industry as well.
Stock Market Performance
Vedanta share price has gained 62% in one year, whereas Hindustan Zinc share price has risen 37% in the same period. Both have outperformed the Nifty 50 index, which rose just 2.6% over the year.
Financial Performance
Revenue Comparison
Vedanta has a higher revenue base and a better growth rate than Hindustan Zinc.
Company |
FY2020 |
FY2021 |
FY2022 |
FY2023 |
FY2024 |
5-Year CAGR |
Hindustan Zinc |
₹185,610 Million |
₹226,290Million |
₹294,400 Million |
₹340,980 Million |
₹289,320 Million |
9.3% |
Vedanta |
₹844,47 Million |
₹880,210Million |
₹1,327,320Million |
₹1,473,080Million |
₹1,437,270Million |
11.2% |
Profitability
Hindustan Zinc has higher EBITDA and net profit margins, while Vedanta has shown a stronger revenue growth trajectory.
EBITDA Growth:
- Hindustan Zinc: 6.4%
- Vedanta: 10.2%
Net Profit Growth:
- Hindustan Zinc: 2.7% CAGR
- Vedanta: Significant turnaround due to coal acquisitions
EBITDA Margins (3-Year Avg.):
- Hindustan Zinc: 55.2%
- Vedanta: 29.1%
Net Profit Margins (3-Year Avg.):
- Hindustan Zinc: 30.1%
- Vedanta: 11%
Dividend Analysis
Dividend Per Share
Company |
2003 Dividend |
FY2024 Dividend |
FY2025 Declared Dividend |
Hindustan Zinc |
₹0.8 |
₹13 |
₹19 (more expected) |
Vedanta |
₹1.65 |
₹29.5 |
₹43.5 (more expected) |
Dividend Growth Rate (Last 5 Years)
Vedanta has experienced a 48.9% growth in dividends, whereas Hindustan Zinc has seen a 4.7% decline.
Dividend Payout Ratio (3-Year Avg.)
- Hindustan Zinc: 151.1%
- Vedanta: 158.8%
Dividend Yield (5-Year Avg.)
- Hindustan Zinc: 11%
- Vedanta: 13.8%
Debt and Financial Stability
Debt-to-Equity Ratio
Hindustan Zinc has a low debt-to-equity ratio of 0.3, making it financially stable, while Vedanta has a higher debt burden at 1.7.
Cash and Liquid Investments (Sept 2024)
Hindustan Zinc holds ₹79.4 billion in cash and liquid investments, whereas Vedanta holds ₹21.7 billion.
Capital Expenditure Plans
Hindustan Zinc has planned ₹50 billion in capex, focusing on maintaining operations, while Vedanta has a ₹180 billion capex plan, aiming to expand aluminium and coal capacities.
Financial Efficiency
Metric |
Hindustan Zinc (3-Year Avg.) |
Vedanta (3-Year Avg.) |
Return on Equity (RoE) |
53.5% |
32.7% |
Return on Capital Employed (RoCE) |
68.5% |
35.3% |
Conclusion
Hindustan Zinc is ideal for low-risk investors seeking stability, while Vedanta is better for those looking for higher dividend growth and revenue expansion.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.