There is a lot of buzz in the financial world about the word ‘dividend’.
We often read about companies paying a low or high dividend in news, but why should we investors be concerned about dividend payouts by these companies. Why is dividend such an important parameter?
Let’s first understand what dividends are.
Dividends in the most basic term, are a share of profit that the company is willing to share with shareholders.
This payout ratio is called dividend payout ratio and the remainder company retains for its future operations is called retention ratio.
Let’s look at India’s top highest dividend paying stocks
|Stock Name||52 week high||52 week low||Market Cap (Cr)||PE Ratio||1 yr Return||Current Price|
|Ingersoll-Rand (India) Ltd.||672.80||490.10||1,871||23.1||4.0%||591.50|
|Wall Street Finance Ltd.||0.00||0.00||31||1.1||-5.7%||26.40|
|Wall Street Finance Ltd.||0.00||0.00||31||1.1||-5.7%||26.40|
|Indian Oil Corporation Ltd.||170.75||105.25||118,854||6.7||-20.9%||126.25|
|21st Century Management Services Ltd.||38.00||12.75||14||0.0||-63.0%||13.75|
|Procter & Gamble Health Ltd.||5120.00||2509.60||7,385||8.8||58.2%||4448.95|
|Shervani Industrial Syndicate Ltd.||0.00||0.00||156||4.8||-42.9%||579.05|
|National Steel & Agro Industries Ltd.||15.80||2.30||11||0.0||-82.1%||2.46|
|National Aluminium Company Ltd.||78.45||39.30||7,696||5.9||-40.0%||41.25|
In this article
- 9 Highest Dividend Paying Stocks
- When Stock Is Eligible for Dividend?
- Types of Dividend a Company Pays
- Benefits of Dividend Stocks
- The Metric – Dividend Yield
9 Highest Dividend Paying Stocks
This company is engaged in manufacturing and sale of the industrial air compressor and its related services. The company has a volatile stock price trend. The profit has been on a declining or to be on a constant trail.
Though the company is trading at one of its low prices now, it expects more investors to pump in funds and thus it pays a higher dividend.
Wall Street Financial Limited has its business operation in the foreign currency exchange sector. It is involved in businesses like traveler’s cheques, B2B and B2C foreign exchange or forex digital solutions.
Talking about the company, this company has low market capitalization and it belongs to the small-cap sector. This stock experiences high volatility in share price.
Also, the company has performed low in past years. But, still, this company provides good dividend yield to stick its investors with the company.
Indian Oil Corporation Limited is a well-known company for us. To refresh, this company engages in oil refining, pipelining, exploration and production. It is a Maharatna company.
Talking about the financials, the company has provided good financial growth for over five years. However, it’s price has declined in recent years, but again it sees a price uptrend.
This company is from the small-cap segment. 21st Century Management Limited is engaged in investments in the capital market, futures and options, etc. The net profit for the company has been on a declining trend. Moreover, it was negative for FY 18.
Vedanta limited is in the business of commercial power and gas along with production and sale of iron and aluminum ore. The company has seen a large reputation built in by the parent group- Vedanta Group. The company has seen a consistent performance for the past five years.
The stock is now trading at a price very near to the book value, hence it is a good time to buy the stock. The dividends have been consistent with this company.
It is a German multinational pharmaceutical, chemical and life sciences company. The company has a good track record for paying dividends and it has been paying for the last 5 years.
The net profit of the company has seen a huge growth in India over the years.
Shervani Industries Syndicate Limited has its business in the real estate sector. It is engaged in the development of infrastructural projects.
This company projects healthy forecasts for growth for proper plans in the pipeline. This stock has a history of providing a good dividend.
Also, the promoter’s shareholding in the company has increased, which gives a good signal for better management.
National Steel and Agro-based industries is an Indian based company engaged in providing galvanized and another form of steel coils and other agricultural products.
The company has delivered a poor growth and it might be a reason why it is paying it’s investors healthy dividends. The share price of the stock falls in the penny stock category.
National Aluminum Company Limited is engaged in the business of manufacturing and selling of Aluminum metal. The company has good financials on the book.
The company’s performance was recently hit by price fluctuations in its raw material called alumina.
The stock is currently trading low and projects a good growth perspective.
When Stock Is Eligible for Dividend?
Not every stock you buy from the stock market pays dividend.
It’s up to the company’s discretion to have a dividend payout policy or not. Well, for the stock paying dividend, there are certain dates which we should be aware of. These are:
1.Dividend Declaration Date
On this date, the company announces about the next dividend it will be paying out and conveys all the information about the amount of dividend to its shareholder.
It is the date at which the company rolls out dividend to its shareholders.
It is the time between the announcement and payment of the dividend.
So, if we purchase a stock on its ex-dividend date or after that we might not be eligible for dividend payments. Thus, the timing of when the share is bought places a critical role.
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Types of Dividend a Company Pays
Usually, the company pays two types of dividends. These dividends are paid on the proportion of how many shares of the company we own. Coming back to the type of dividends, these can be:
1. Cash Dividend
The Company directly pays the amount of the proportionate dividend in cash or credits account of the shareholder.
2. Stock Dividend
The company pays the dividend in the form of additional shares. For example, if a company declares 10% of the stock dividend, the investors would get 10 additional stocks for every 100 stock they own.
In India, paying cash dividends is doubled tax to the company.
The information regarding dividends may sound appealing but why should opt for dividend-paying stocks?
Benefits of Dividend Stocks
1. Proxy for Fixed Income
Dividend-paying stocks pay dividends over the return that a stock might give. It is like keeping money in Bank and earning periodic interest along with returns from the stock in the end.
Even if the stock plummets, investors might still get their periodic dividends. Hence, it helps to mitigate risk.
2. Healthy Financial
The Company which is paying the dividend sends a strong signal of its sound financials. It signals the company’s operational efficiency to earn profit more than required.
3. Investors first
The company would be keeping the interest of shareholders first as it values them more
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The Metric – Dividend Yield
We all know that various stocks trade at various values, hence their dividend payout is different. Then, could we standardize this dividend paying capability and have a relative comparison?
The answer is through dividend yield. The dividend yield is defined as the ratio of the dividend the company pays to the share price of the stock. This metric standardizes the process for relative comparison.
Dividends paying stocks provide small investment benefits which are the same as bank providing interests on our deposits.
Most of the high dividend paying stocks are from the small-cap and some may be in the mid-cap sector. Hence, there are some risks attached. We, investors, should look into fundamentals and then question
“Why is the company repaying me?”
If the answer is acceptable we should proceed for investments. It all depends on decoding the motive behind the dividend payments.
Disclaimer: The views expressed in this post are that of the author and not those of Groww