Investors seeking steady income from their investments often turn to the highest dividend paying Indian stocks.
Dividends have been the best possible source of income for many market participants and investors like you over time. But how do you know which are the highest dividend paying Indian stocks or shares, one can pick?
Before we explore some of the highest dividend paying Indian stocks and the highest dividend paying companies in this blog, let’s learn some basics first.
What is a Dividend?
A dividend is a reward, either in cash or other forms, bestowed upon shareholders by a company. The company’s board of directors determines dividends, subject to shareholder approval. While not mandatory, dividends are typically a share of the company’s profits distributed to its shareholders.
After settling debts, a company may allocate residual profits for shareholder rewards as dividends. However, in cases of cash shortages or the need for reinvestment, companies pay dividends and may opt not to pay dividends. When declaring dividends, a company establishes a record date; shareholders registered by that date qualify for a dividend payout based on their shareholding. The company usually dispatches dividend checks to shareholders within a week. Stocks are commonly traded with dividends included until two business days before the record date, after which they become ex-dividend.
What are High Dividend Yield Stocks?
Understanding top dividend paying stocks in India involves grasping the concept of ‘dividend yield.’ This term refers to the income investors receive relative to the current stock price. It’s calculated using the formula:
Dividend Yield = (Annual Dividend / Share Price) x 100
High dividend paying stocks, those with a higher yield compared to a benchmark, are sought after by investors. Investing in these stocks can provide a reliable income stream, which investors often reinvest to enhance returns or allocate toward long-term goals like retirement.
Investors should evaluate the potential of the best dividend stocks based on their consistent dividend payments and the steady growth in the dividend percentage. This ensures the selection of high dividend stocks that offer both share price appreciation and regular distributions, making them a valuable investment.
What are the Highest Dividend Paying Stocks in India 2024?
The Indian stock market has been growing at an impressive rate due to India’s booming economy. However, some stocks that pay dividends are considered best dividend paying penny stocks in India. Therefore, we have listed some of the highest dividend paying Indian stocks comprising large institutions and smaller companies. Some of the top 10 dividend paying stocks in India are as follows:
|Market Capitalization (in Cr)
|3Y Historical Dividend Growth
|Hindustan Zinc Ltd
|Mining - Diversified
|Metals - Diversified
|Colgate-Palmolive (India) Ltd
|FMCG - Personal Products
|Schaeffler India Ltd
|Zee Entertainment Enterprises Ltd
|TV Channels & Broadcasters
|Sanofi India Ltd
|Thyrocare Technologies Ltd
|Hospitals & Diagnostic Centres
|Novartis India Ltd
|TV Today Network Ltd
|TV Channels & Broadcasters
Note: The data is from 23rd January 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Overview of the Top Dividend Paying Stocks in India
Let us now look at an overview of the top highest dividend stocks in India from our list of the top 10 dividend paying stocks in India. Here is a brief overview of the best dividend paying stocks listed above:
Tata Consultancy Services Limited (TCS) is engaged in providing information technology (IT) services, digital and business solutions. It is one of the top 10 dividend paying stocks in India. On a trailing 12-month basis, it generates an operating revenue of Rs. 232,081.00 Cr., showcasing outstanding annual revenue growth of 17%, a great pre-tax margin of 25%, and an exceptional ROE of 46%, making it one of the best stocks for dividends.
HDFC Bank Limited offers a range of banking services covering commercial and investment banking on the wholesale side and transactional/branch banking on the retail side. It is one of the best dividend stocks in India. On a trailing 12-month basis, it generates an operating revenue of Rs. 221,485.07 Cr., demonstrating outstanding annual revenue growth of 22%, a great pre-tax margin of 30%, and a good ROE of 15%.
ICICI Bank Limited is engaged in providing a range of banking and financial services including commercial & retail banking, project & corporate finance, insurance, venture capital and private equity, investment banking and broking. It is one of the best dividend shares. On a trailing 12-month basis, it records an operating revenue of Rs. 199,044.47 Cr., demonstrating outstanding annual revenue growth of 18%, a great pre-tax margin of 25%, and a good ROE of 16%.
One of the top dividend paying stocks in India, Hindustan Unilever clocked an impressive operating revenue of Rs. 61,931.00 Cr. in the last 12 months. With a remarkable annual revenue growth of 16%, a robust pre-tax margin of 22%, and an exceptional return on equity (ROE) at 20%, the dividend paying stock demonstrates noteworthy financial strength.
ITC boasts a remarkable operating revenue of Rs. 70,278.34 Cr. over the last 12 months. With an impressive 17% annual revenue growth, a commendable pre-tax margin of 36%, and an exceptional ROE of 27%, its financial performance stands out.
The State Bank of India generated an impressive operating revenue of Rs. 540,660.26 Cr. in the last 12 months, showcasing outstanding annual growth at 16%. Notably, it achieved a great pre-tax margin of 16% and a good return on equity (ROE) of 16%.Thus, they fall amongst shares with high dividends
Infosys generated an impressive operating revenue of Rs. 152,686.00 Cr. in the last 12 months. The outstanding annual revenue growth of 21%, great pre-tax margin of 23%, and exceptional ROE of 31% showcase its financial strength.
Housing Development Finance Corporation Limited finances the purchase or construction of residential houses, commercial real estate, and other purposes in India through loans. It has a market cap of ₹5,08,651 Cr.
Bharti Airtel generated Rs. 146,297.20 Cr. in operating revenue over the past 12 months. Although the 9% ROE is acceptable, there is room for improvement.
Bajaj Finance generated an impressive operating revenue of Rs. 48,019.96 Cr. in the past 12 months, boasting a remarkable 31% annual revenue growth, a commendable pre-tax margin of 38%, and an exceptional ROE of 21%, making it one of the best monthly dividend paying stocks.
Note: This list is for educational purpose only and not recommendatory.
Which Sectors Offer the Highest Dividend Paying Indian Stocks?
Our dividend smallcase by Windmill Capital offers you the opportunity to wide array of investment opportunities. Investors must take their decisions according to their investment objectives and risk appetite, whether they want a basket heavy on large cap stocks or small or mid cap stocks. They can also choose between term dividend streaks (Dividend – Smart Beta) and long term dividend streaks (Dividend Aristocrats), while making their decision. Let us now look at a few sectors that generally offer high dividend paying Indian stocks:
The financial sector stands out as one of the most lucrative for investors, with real estate investment trusts (REITs) and related industries contributing to its high average yield. Notably, banks and insurance companies within the sector often offer comparatively lower yields.
Favored by dividend investors, the utility sector encompasses diverse industries, including foreign, electric, gas, and water. Despite modest price growth in the last five years, these stocks are considered defensive due to their stable revenue, which remains unaffected by economic conditions.
Basic Materials Sector
The basic materials sector presents a high overall dividend yield, primarily propelled by the Oil and Gas Drilling & Exploration and Industrial Metals & Mining industries. However, some sub-industries, such as Aluminum, Silver, and Specialty Chemicals, yield less than 2%.
Consumer Goods Sector
Led by cigarette and tobacco product industries, the consumer goods sector is renowned for its high yields. Despite the prevalence of low-yield industries, there are still promising investment opportunities within this sector.
As the largest sector, services encompass stocks from 60 industries, including gaming and shipping. Notably, the average dividend yield in this sector tends to surpass that of the overall market.
Comprising 32 industries, the technology sector is spearheaded by the domestic telecom industry, known for its high-yield stocks. While the tech industry is not generally associated with attractive dividends, some companies do incorporate dividends into their financial strategies.
The healthcare sector offers a varied landscape in terms of dividend yield, with drug manufacturer industries often providing the most favorable returns. Despite this variation, the overall sector’s average yield aligns with the broader market.
Industrial Goods Sector
Despite having the lowest average dividend yields, the industrial goods sector still offers opportunities for dividend investors to find stocks with decent payouts. Investors should carefully navigate the unique characteristics of this sector to uncover promising investments.
Why Invest in the Highest Dividend Paying Stocks?
relative to the market or their peers. Thus, investing in the highest dividend paying stock in the Indian stock market can be beneficial for several reasons:
- Reliable income: Dividend paying stocks can be a reliable source of income, which can be particularly attractive for those who are retired or seeking regular income from their investments.
- Potential for capital appreciation: Companies that pay dividends are often well-established and financially sound, which can lead to the potential for capital appreciation over time.
- Protection against inflation: Dividends can help hedge against inflation by providing you with a steady income stream that can keep up with rising prices.
- Stability: Dividend-paying companies are often more stable than non-dividend-paying companies, as they typically have strong cash flows and are less likely to experience drastic swings in stock prices.
- Reinvestment opportunities: Dividends can be reinvested into the company, which can help compound your returns over time.
In addition to above pointers, investors are advised to do a thorough research and/or consult their financial advisor before investing in high dividend paying stocks in India.
How to invest in the highest dividend paying stocks via smallcase?
Let’s go through a few steps you can follow to invest in high dividend paying stocks via smallcase:
- Log in with any Indian smallcase broker and enter your password on the smallcase app or website.
- Explore Dividend smallcases by Windmill Capital or the High Dividend Yield and Capital Appreciation smallcase to find out which suits your needs best. After aligning your investment goals with a particular smallcase, make your choice.
- Review your personal details and the billing plan before placing an order. Next, click on ‘Invest now’.
- Lastly, choose between Monthly SIP or One Time payment method.
- Finally, click on ‘Confirm Orders’.
- Congrats! You have now invested in Highest Dividend Paying Stocks!
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered experts
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
Disclosures for High Dividend Yield and Capital Appreciation smallcase
What is the Criteria for Selecting High Dividend Yield Stocks?
When selecting the highest dividend paying Indian stocks, here are some criteria that you can consider:
- Dividend Yield: A high dividend yield is generally considered 4% or higher, but this can vary depending on the industry and market conditions. You should look for stocks with a consistent history of high dividend yields.
- Dividend Growth: You may also want to consider the growth rate of the company’s dividend payments. A company that consistently increases its dividend payout over time is usually a sign of financial strength and stability.
- Earnings and Cash Flow: It’s important to analyze the company’s earnings and cash flow to ensure it can sustain its dividend payouts. It is advisable to look for companies with stable earnings and cash flow growth.
- Payout Ratio: The payout ratio is the percentage of earnings a company pays out as dividends. A high payout ratio may indicate that the company is paying out more in dividends than it can afford, which could lead to a dividend cut.
- Industry and Market Conditions: Certain industries, such as utilities and consumer staples, are known for paying high dividends. You may also want to consider market conditions, such as interest rates and inflation, as these can impact the performance of the highest dividend paying stocks.
- Company Financials: It’s important to analyze the company’s financial statements, such as its balance sheet and income statement, to ensure it has a strong financial position. You must check the company’s debt and credit ratings.
However, investors must do their own research and/or consult their financial advisor before investing.
What are the Strategies for Investing in High Dividend Yield Stocks?
Here are some strategies for investing in the highest dividend paying Indian stocks:
- Focus on Quality: Look for companies with strong financials, stable earnings, and a consistent history of paying dividends. Companies with a competitive advantage, such as a strong brand or intellectual property, are also good choices.
- Diversify: Since diversification is key, you should consider investing in multiple high dividend stocks across different sectors and industries to spread their risk.
- Look for Dividend Growth: Companies that consistently increase their dividends over time may offer income and capital appreciation potential.
- Consider Total Return: While dividend income is an important factor, you should also consider a stock’s total return potential, including the potential for capital appreciation.
- Keep an Eye on Industry and Market Conditions: You should consider industries and the market conditions, such as interest rates and inflation, which can impact the performance of the highest dividend paying stocks.
As always, investors must do their own research and/or consult their financial advisor before investing in high dividend stocks.
What are the Risks Associated with High Dividend Stocks?
Although the highest dividend paying Indian stocks can be attractive, thus, it is important to learn more about the risks associated with them.
Fool’s Gold Dilemma
- High dividends might be alluring, but investors must scrutinize the reasons behind the elevated dividend yield.
- A notably high dividend yield could indicate financial distress within the company, with share prices falling due to underlying financial challenges.
- This attractiveness may be short-lived, as companies under financial stress might reduce or eliminate dividends to preserve cash, potentially resulting in a further decline in stock prices.
Interest Rate Risk
- High dividend stocks are particularly sensitive to changes in interest rates.
- These stocks tend to become more attractive when interest rates are low; however, a shift in monetary policy, such as a rise in interest rates by the Federal Reserve, can alter this landscape.
- As interest rates increase, dividends become less appealing to investors compared to the potential returns from risk-free government bonds, like Treasury bonds.
- This shift in perception may trigger an outflow from equities, affecting high dividend stocks for the long-term disproportionately.
Therefore, to mitigate risks while investing in the best dividend-paying stocks, investors can diversify investments across different asset classes and industries with smallcase.
Dividend Yield vs Dividend Ratio
What’s the Difference?
So, comparing corporate dividends, a dividend yield tells you the rate of return in the form of cash dividends to its shareholders. Percentage represents dividend yield instead of the actual dollar value. This makes it a bit easier for shareholders to calculate the dividend returns based on the percentage value.
Another popular financial metric for many investors is the dividend payout ratio. A dividend payout ratio is the proportion of its net income that is distributed as dividends as compensation to its shareholders. Generally, dividend payout ratios are regarded as better indicators of a company’s financial strength because they directly relate to cash flow.
What are the Advantages of the Highest Dividend Paying Indian Stocks?
Let’s look at why high dividend stocks can be a potentially good investment option.
- Potential for Higher Total Returns: In addition to dividend income, high dividend stocks also offer the potential for capital appreciation. Historically, high dividend yield stocks have outperformed low or no-dividend stocks, offering higher returns over the long term.
- Lower Risk: Companies that pay high dividends tend to be well-established, financially stable companies with consistent earnings. This can make even the monthly dividend stocks India less volatile and less risky than other stocks.
- Inflation Protection: Dividend income can provide a hedge against inflation. Unlike fixed-income investments, such as bonds, dividend payments tend to increase over time, helping to maintain purchasing power in the face of inflation.
- Tax Advantages: In some cases, the best dividend paying stocks may be taxed at a lower rate than other types of investment income, such as interest income. Thus, you can take a tax advantage from dividends.
However, one must consider their investment goal and risk appetite before investing in these highest dividend paying stocks in India.
Factors to Consider Before Investing in the Highest Dividend Paying Stocks
Here are a few factors to consider if you are looking to invest in highest dividend paying stocks:
Payout or Yield Ratio Significance
- High ratios imply fewer profits for business reinvestment.
- Formulaic assessment reveals if dividends divert significant profits.
Caution in Sole Reliance on Ratios
- Highest dividends of the best dividend-paying stocks for the long-term don’t assure future investment success.
- Ratios are one of several factors in stock investment decisions.
Dynamic Nature of Yield Ratio
- The yield ratio of the top dividend paying stocks in India fluctuates with changes in share market prices during trading sessions.
Avoid Fixating on Absolute Dividend Numbers
- Rs 100 per share doesn’t inherently indicate a strong company.
- Rs 10 per share doesn’t necessarily denote a weak company.
Comprehensive Company Evaluation
- Look beyond dividends when considering highest dividend stocks; consider earnings, outstanding shares, and shareholders.
- Metrics such as ratios play a crucial role in this evaluation of high dividend yield stocks in India.
Top Dividend Stocks ≠ Automatic Good Investments
- Prioritize scrutiny of company fundamentals over dividend levels, when considering the best dividend-paying stocks.
- Ratios guide investors in a more thorough analysis.
To Wrap It Up…
In conclusion, investing in the highest dividend paying Indian stocks can be a good strategy for investors looking for a steady income source and potential for long-term total returns.
Many companies offer dividends as compensation to their shareholders while signaling their healthy financial growth to keep the investor’s interest intact. All in all, refer to our prepared dividend smallcases (offering Dividend portfolios like Smart Beta, Dividend Stars, and Dividend Aristocrats) that include the highest dividend paying companies offering high dividends to their shareholders over time.
The following companies typically have high dividend shares. Thus, three best dividend paying stocks in India are:
1. Hindustan Zinc Ltd
2. Vedanta Ltd
3. Colgate-Palmolive (India) Ltd
Note: This list for educational purpose only and not recommendatory.
Explore Dividend smallcases by Windmill Capital or the ‘High Dividend Yield and Capital Appreciation’ smallcase to find out which suits your needs best. After aligning your investment goals with a particular smallcase, make your choice. But, one must consider the risk appetite and investment goals before investing in the highest dividend paying stocks.
Investors can enjoy the advantages of capital growth and steady income by investing in good dividend stocks India. Purchasing a high-dividend stock can lead to sustained benefits over time. Ultimately, selling the highest dividend paying stocks can result in a substantial profit.
The best stocks for dividends, with their lower volatility, attract investors seeking reduced risk, particularly those approaching or in retirement. However, dividend paying stocks India pose risks if one is unfamiliar with potential pitfalls.
Good dividend paying stocks 2024 may not only offer a steady income but also thrive in defensive sectors, demonstrating resilience during economic downturns with lower volatility. These dividend paying stocks, known for their substantial cash reserves, typically represent robust entities with promising long-term prospects
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