10 Highest Dividend Paying Stocks in India 2023

10 Highest Dividend Paying Stocks in India 2023
Reading Time: 10 minutes

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, you should 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?

Dividends are payments made by a company to its shareholders, which are decided by the board of directors. Dividends are often distributed quarterly and can be offered in cash or reinvestment of additional stocks. 

For investors, dividends provide impressive returns at a dated interval that can be used to evaluate a company’s performance and potential. You can also keep track of your dividend returns of the top dividend stocks in India by yourself. Thus, common shareholders receive dividends in the highest dividend paying companies, if they own stock before the ex-dividend date.

What are High Dividend Yield Stocks?

A dividend yield (div yield) is a ratio of dividend/price used to measure the cash income received from a stock income relative to the stock price. In other words, the dividend yield method determines how much a particular company pays out in dividends each year. 

A perfect dividend yield example could be, 

If a company’s dividend yield is 7% and you own ₹8,00,000 of company stocks. In this case, your annual payout amount is ₹56,000, i.e. ₹14,000 quarterly payments. 

Hence, the formula for calculating a stock’s dividend yield, 

Dividend Yield (%) =  Annual Dividends Per Share ÷ Price Per Share​

High dividend yield stocks (like the Dividend Kings portfolio on smallcase) can signal a strong investment opportunity, while low dividend yield stocks may suggest a lack of growth potential. The high dividend yield stocks could be calculated from the last year’s company’s financial statements/reports.

Companies generally pay dividends on the number of stocks you own rather than the value your stocks hold. Because of this, dividend yields fluctuate based on stock prices. 

What are the Popular Indian Paying Stocks?

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 dividend paying stocks. 

Therefore, we have listed some of the highest dividend paying Indian stocks comprising large institutions and smaller companies. Some of the top dividend paying stocks are as follows: 

Company NameType of Industry Market Cap (in ₹)Dividend Yield
Tata Consultancy Services LtdIT Services & Consulting11,74,079.813.58
HDFC Bank LtdPrivate Banks9,15,565.351.15
ICICI Bank LtdPrivate Banks6,56,452.580.85
Hindustan Unilever LtdFMCG - Household Products6,25,402.45
ITC LtdFMCG - Tobacco5,31,422.042.96
State Bank of IndiaPublic Banks5,23,250.000
Infosys LtdIT Services & Consulting5,15,8662.73
Housing Development Finance Corporation LtdHome Financing4,98,7791.60
Bharti Airtel LtdTelecom Services4,57,4130.51
Bajaj Finance LtdConsumer Finance4,05,267.190.45

Which Sectors Offer the Highest Dividend Paying Indian Stocks?

No magic lies in the eyes of a shareholder or a company that can accelerate your dividends returns, but our dividend smallcase by Windmill Capital is the new magic potion in the market. Thus, let us look at some of the highest dividend paying Indian stocks sectors that can offer high dividend yields. 

  • Utilities: Water, electricity, and natural gas suppliers offer consistent and high dividend yields showcasing a powerful history of stable dividends.
  • Telecommunications: Companies that offer telephonic and internet services have high dividend returns.
  • Consumer Staples: Companies that offer branded consumer essentials (food, beverages, household goods, household and hygiene) comparatively offer long-lasting dividend returns.
  • Real Estate: Real Estate Investment Trust’s (REITs) distribute their profits among their shareholders to keep tax status safe. As a result, this could lead to much higher dividend yields. 
  • Energy Generation: Energy infrastructures, including master limited partnerships that generate and supply energy, offer 6% – 7% dividend yields.

Why Invest in the Highest Dividend Paying Stocks?

As mentioned above, the highest dividend paying Indian stocks refer to companies with a high dividend yield 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. 

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 payouts.
  • 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. 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.

What are the Benefits of the Highest Dividend Paying Indian Stocks?

The primary reason to understand the highest dividend paying Indian stocks is to check which companies offer the highest return on dividends. However, let’s look at why high dividend stocks can be a good investment choice for you. 

  • Income Generation: High dividend yield stocks can provide a steady income stream for you. This can be particularly beneficial for retirees or those looking for a source of passive income.
  • 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 them 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, dividends 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.

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. Therefore, to mitigate risks, you can diversify investments across different asset classes and industries with smallcase

  • Volatility of stock prices: High dividend stocks can be subject to price volatility. The stock price may fluctuate due to changes in market conditions, company-specific factors, or other external factors. Some investors, particularly those who rely on dividend income, may find this volatility challenging. 
  • Interest rate risk: High dividend stocks can also be subject to interest rate risk. If interest rates rise, fixed-income investments such as bonds may become more attractive, causing you to sell high dividend stocks. 
  • Economic downturns: It can be risky for high dividend stocks as companies may cut or suspend dividend payments to preserve cash flow and maintain financial stability during challenging economic times.

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.
  • Monitor Payout Ratios: A high payout ratio may indicate a company pays out more in dividends than it can afford. Additionally, you can also monitor payout ratios to ensure the company can sustain its dividend payments.
  • 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. 

Dividend Aristocrats smallcase by Windmill Capital

Dividend Stars smallcase by Windmill Capital

High Dividend Yield and Capital Appreciation smallcase by Green Portfolio

Dividend – Smart Beta smallcase by Windmill Capital

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. The dividend yield is represented in percentage 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. 

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 signalling 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. 

Happy Investing! 

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