Top Dividend Stocks in India: High Yield & Growth Potential

An investor should check the company’s financial statements and future prospects, before investment. These include the company’s profit and sales growth over a period, margins, debt level and other ratios.

You, as an investor, invest in a stock, if the company grows, the share value appreciates. Your investment too appreciates and you can liquidate the same if it suits you.

If a company earns profits, it has two primary options in utilising the profits earned. They are: to retain the earnings, and pay-out dividends. 

A company distribute the profits to shareholders as dividends.

Dividends are paid to investors in proportion to the number of shares held by each of them.

For example, a company may declare a dividend of Rs 10 per share for a specific period. If you held 1,000 shares in the time frame, you would receive Rs 10,000 as dividends. Some of the best dividend-paying stocks are regular with rewarding their shareholders.

There are two things regarding dividends you should keep in mind.

1. Discretionary: Dividends are discretionary. Companies are not legally bound to pay dividends to you. It is as per their will.
2. Others: Usually dividends are paid out of profits. But a loss-making company can also pay dividends, if there is adequate reserve surplus.

Parameters used to filter the companies

• Market capitalisation of stocks more than Rs 2,000 crores. This is as per AMFI classification (Jan-Jun 2021)
• Top 10 companies paying dividends in the next one week has been filtered
• Source considered BSE

List of dividend-paying stocks in India between Dec 13 to Dec 17

Here are the companies that are going to pay dividend in the coming week: 

• Hindustan Zinc

Hindustan Zinc, a company that manufacturer of high grade quality zinc used in construction and pure lead.

The company has declared an interim dividend of Rs 18 per share.

The ex-dividend date is Dec 14, 2021.

For more information about the company click: Hindustand Zinc

• NMDC

NMDC is one of the producer and exporter of iron ore. The company is also engaged in exploring other minerals including copper, gypsum, lime stone and graphite.

The company has announced an interim dividend of Rs 9.01 per share.

The ex-dividend date is Dec 14, 2021.

For more information about the company click: NMDC

• Rajesh Exports

Rajesh Exports is a gold retailer in India and is engaged refining, selling, and designing of gold jewellery and medallions.

The company has declared a dividend of Re 1 per share.

The ex-dividend date is Dec 15, 2021.

For more information about the company, click: Rajesh Exports

• Vedanta

Vedanta is among the country’s largest producer and exporter of iron ore. It also produces copper, pig iron, and aluminium.

The company has declared second interim dividend for the year of Rs 13.50 per share.

The ex-dividend date is Dec 16, 2021.

To know more about the company, click: Vedanta

What is ex-dividend date?

The ex-dividend date is the date by which you need to complete your purchase of shares. That is, you should be a shareholder on or before this date. So that you are eligible to receive dividends on record date.

Read more on Groww: What is the Significance of Record Date and Ex-Dividend Date in Corporate Actions?

The record date is usually 1-2 days from the ex-dividend date. It is when you are eligible to receive dividend. 

Let’s say the ex-dividend date for a stock is November 15. The record date is, say, November 16. Only if you are a shareholder before November 15, you can receive dividend. 

Let’s say you placed an order on Nov 12. Currently, it takes a day or two for the shares to deliver to an investor’s trading account from the day of purchase. So if you get the shares in your trading account on Nov 16 (on the record date), you will still be entitled to receive the dividend. 

Dividend Yield vs Dividend Payout

• Dividend Yield: It shows how much dividend a company paid out in a year. The dividend yield is expressed as a percentage of the current market price. It gives you a sense of how much returns (in percentage) you have earned from your investment.

Formula – Dividend Yield: Annual dividend per share / current share price

• Dividend Payout: Dividend payout tells us how much dividend has the company paid out from its net income.

Formula – Dividend payout: Annual dividend per share/ Net Income

Things to keep in mind

What do the ratios tell us: 

A very high payout or yield ratio would mean that a very less amount of profits is being reinvested. This can be derived easily from the formula. If the dividend is very high, this means the company is diverting lesser profit for reinvestment back into the business and more for dividend payouts.

Analysing dividends:

These ratios should only be used to analyse the dividend payout situation of the company and should not be the sole reason for why you are or you are not investing in a company’s stock. Even the highest dividend-paying stocks can turn out to be bad investments in future.

Yield ratio is dynamic:

Share market price is a dynamic figure. It may change every second of a trading session. Therefore, dividend yield could also vary.

Do not look at absolute dividend numbers: 

Do not look at these numbers to make decisions. A dividend of Rs 100 per share doesn’t speak high about a company. And a dividend of Rs 10 per share doesn’t speak low of a company.

The highest dividend-paying stocks may not necessarily be a good investment. You need to look at the company’s earnings, the number of outstanding shares, shareholders and other metrics. And this is where the ratios come into play.

Dividends and Net Profit

Dividends need to be seen in correlation with the net profits. Some of the best dividend-paying companies use their profit judiciously. Whilw rewarding shareholders is good, the profit needs to be strategically reinvested in the company. This ensures growth and enables long term wealth creation for investors.

Point to Note

These may be the top dividend-paying stocks in India.  Keep in mind, this should not be the only reason for picking a stock.

Companies may also pay dividends if they are making losses. There are a host of other factors you need to look at like profit history, business outreach, debt conditions, management quality etc. Do your research to an informed decision.

Happy Investing!

Disclaimer: This article is only for educational and informational purposes. Investors are advised to invest in stocks after thorough research and based on their investment goals. The views expressed in this post are that of the author and not those of Groww