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Dividend Paying Stocks

Best Dividend Paying Stocks in India

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Investors desire high returns on investment. This is the reason why majority like capital appreciation & not dividend yield. But dividend yield of stocks is often very low compared to desired growth rate. Then why champion-investors love best dividend paying stocks? High growth rate is a priority for majority, but expert investors believe in passive income. Dividend income is one of the best passive income source. People who believes in passive income, loves dividend paying stocks. Passive income are like critics of fast growth. Such investors does not love fast-growth just for the sake making money. Passive income (dividend) is almost like a assured income. Whereas capital appreciation (potential high growth) is not assured. For passive income lovers, it is essential to track and buy the best dividend paying stocks. Not all stocks that pays dividends are best. In this article we will provide list of best dividend paying stocks for passive income lovers. Expert investors does not like dividend paying stocks just for assured income. Potential of dividend income to grow year after year makes it even more likeable.

Dividend payment is a process by which companies share net profit with its shareholders. Increasing dividend payout means increasing companies net profit. Companies which are able to grow its profit year after year are good for investing. Dividend yield of stocks at point of purchase can be low. But over a period of time, with improving PAT, dividend also improves.

In Indian stock market, there are companies that pays consistent dividend. Consistency and growth in dividends makes it likeable. Stock of such companies should be our investment target. Dividend stocks offer 2 clear benefits to investors. One, they generate short term income in form of dividend. This income is both consistent and also grows at slow rate. Secondly, they also provide capital appreciation when held for long term. Due to high inflation rate prevailing in India, other risk-free investment options generate poor returns. As dividend in tax free, it clearly enjoys advantage over other income generating options. The fact that dividend stocks can also provide long term capital appreciation makes them special. In general, a decent dividend paying stocks will yield dividend between 2%-4% per annum. Important for investors to track such stocks and hold them for long term. In short term dividend will keep dripping-in. In long term capital appreciation will also prove beneficial.

Dividend Paying Stocks are Stable...

Dividend paying stocks are very stable. Historically, price of dividend paying stocks are most stable. Compares to all other stocks, dividend paying stocks has least beta. We may not feel this benefit in normal course of time. But when stock market crashes, and when everywhere there is a panicky, dividend stocks provides stability. Generally, investors continue to hold on to dividend stocks even during market crash. The reason is simple, they continue to earn dividend even during market crash. Moreover, dividend stocks are those stocks, which recovers (after crash) faster than any other stocks. So, instead of selling stocks, expert investors buy dividend stocks during market crash. Dividend stocks are good for faint hearted. As price of such stocks does not fall much (compared to others), holding this during crash is like a solace. In worst of times (like year 2001, 2008) dividend paying stocks showed resilience. When Indian SENSEX was crashing, dividend stocks were comparatively stable. What does this mean for investors? Companies that can afford to pay consistent dividends has stable stock price.

Dividend is like regular income…

If equity can generate regular income, there cannot be a better investment. Equity is more famous for long term capital appreciation & risky. Short term reliability of equity is bare minimum. But dividend stock is a hybrid of equity and debt. For a defensive invest like me, dividend stocks allows us to include equity in portfolio. Once investors get hold of a good dividend stocks, they never sell them. This gives dividend paying stocks its price stability.

Accumulate more of Dividend stocks…

There are more buyers of dividend paying stocks than sellers. But there is an exception during market crash. During market crash sellers dominate the market. During crash, market price of stocks falls. But this makes dividend stock holders even more happy. They buy more dividend stocks during every price-fall.

Dividend is a strong value indicator…

Value investors considers high dividend yield as a strong value indicator. If a quality stock is yielding high dividend, it is considered as undervalued. Quality stocks are one that has strong fundamentals. Improving sales and profit figures are one of the strongest fundamental indicators. High profitability and low debt dependency is just like a icing on cake. If such companies also yield high dividends, then they are best bet for value investors. Companies which shares its profits consistently (dividends) are confident companies. This confidence comes with predictability of future earnings. Companies will never compromise its short term liquidity to please shareholders. So if a company is paying dividends it means the liquidity is in check. Maintaining liquidity to pay its current liabilities is a top priority for any company. A company which is paying regular dividends must have sufficient liquidity to take care of its current liability.

How to accumulate dividend paying stocks…?

In India there are only few avenues to accumulate dividend. One of the well-known way is to buy stock that pays dividends. Another way is to buy dividend paying mutual funds. In Europe and America dividend paying exchange traded funds (ETF’s) are also available. At the moment India do not have such ETF’s. People can buy stocks using online trading account. These days mutual funds can also be purchased using online trading platforms. If one does not have one then the easiest option is to call your bank. They will send investment agents who can arrange to buy dividend focused mutual funds for you.

High Dividend Yield is enough.....?

Some might think that high dividend yielding stocks are good. But yield is not a sufficient indicator to identify good dividend paying stocks. Stocks paying high dividend one year and nothing the following year is also not good. Consistent dividend payment is what is more interesting. If dividend paying stock are so good, why everyone do not only buy them? This is because not many know how to identify good dividend stocks. People just focus on high dividend yield, but this is insufficient. It may happen that a stock is yielding 8% dividend. But the following year the yield falls to as low as 0.5%. This is what happens for majority companies. For majority stocks dividend yield is not more than 1%. Investors target is to buy dividend stocks which has consistently paid dividends and their yield is also high.

Beware of Fluctuating dividends and weak fundamentals….

Fluctuating dividend and weak fundamentals are main hurdles in identifying good dividend stocks. I have seen a stock (Strides Arcolab) which was ones yielding dividend of 33% per annum. The doubt that such stocks raise is that are such high yields sustainable? When looked into profit and loss account of Strides Arcolab we found the answer. Profit of company has been most wavering. Its reported net profit for last five years was (in Rs. Crore) 55.99, 117.92, 73.56, 105.51 & 6.14. Though in last five years the profit rose from Rs 6 crore to Rs 56 crore but volatility in earning was too high. Probably to keep investors interested in its stocks high dividend payout was maintained by company. There is no doubt that such high dividend yields cannot be sustained in coming years. The best option to identify good dividend paying stocks is to dig deep into financial reports. Proportionately increasing EPS and dividend per share is a good indicator. Too high dividend payout is not sustainable.

The purpose of writing this article is to publicize the concept of dividend focused investing. Not many people are motivated to buy stocks for dividends. Dripping dividends are less exciting compared to more visual capital appreciation. Capital appreciation cannot be as certain as dividend income. People favor capital appreciation because it gives probability of higher earnings. But dividends are more reliable. I this article will motivate readers to consider dividend focused investing.

Dividend income is like risk free income...

Even during recession, dividend paying companies share its profit. When companies are doing well, dividend distribution will happen. Dividend is like a tool in hands of companies that they use to lure shareholders. In turn shareholders offers their loyalty by holding on to their stocks. Why investors like dividend? Investors considers dividends like risk free income. Good dividend paying companies generally pay dividend each year. So dividend income drips in each year like interest income.

Weak Market offer better dividend stocks...

Generally, quality & consistent dividend paying stocks are never available at undervalued rates. But when market itself is weak, the price of stocks becomes attractive. If one bought say 10 Nos dividend stocks at $20. Suppose these stocks pay $1 as dividend income. It means the dividend yield is 5%. Suppose due to Eurozone crisis the price of this share falls to $15. In this case more stocks shall be purchased. Why? Because this price dips has increased dividend yield to 6.67% ($1/$15). The companies which pay consistently high dividends are mostly stable, blue chip companies. These dividend paying stocks are always in demand.

Re-investment of Dividends is Key…

Reinvesting dividend further increases the yield. People must invest systematically to accumulate dividend stocks. This way not only they accumulate fundamentally strong stocks but also increase dividend earning. It is important to reinvest dividend that flows-in. This extra money buys more dividend stocks. This cycle continues. More stocks means more dividend, which again buys more stocks. It is said that Warren Buffett earns billion dollars alone in dividends. Let us set a personal target for ourselves. In next five years our dividend income shall be reach Rs 5,000/month. Let us start accumulating quality, dividend paying Indian stocks.

Top 15 Stocks (Lump Sum Dividend)

SL Company Average Dividend in Last 5Years (Rs.Cr.)
1 ONGC 7,828.28
2 CIL 7,630.02
3 TCS 4,424.16
4 ITC 3,940.06
5 NTPC 3,809.39
6 Infosys 2,721.60
7 RIL 2,484.33
8 HUL 2,252.18
9 IOC 2,058.90
10 NMDC 1,986.32
11 Hero MotoC 1,537.83
12 Wipro 1,505.40
13 BHEL 1,249.52
14 OIL INDIA 1,191.45
15 Bajaj Auto 1,157.47

Top 15 Stocks (Dividend Paid / Share)

SL Company AVERAGE DIV. (5Y)
1 Hero MotoC 77.01
2 Bosch 64.00
3 Nestle 48.50
4 Infosys 47.46
5 Bajaj Auto 44.00
7 PAGE IND. 38.80
10 OIL INDIA 34.10
11 MRF 30.99
12 Asian Paints 30.06
13 ACC 28.30
15 BLUE DART 25.00

Top 15 Stocks (Dividend Yield – CY)

1 MAX INDIA 13.84%
2 CIL 7.57%
3 PIRAMAL ENT. 6.27%
4 NMDC 5.86%
8 NTPC 3.99%
9 SJVN LTD 3.77%
12 OIL INDIA 3.39%
13 Infosys 3.21%
15 HPCL 2.83%

Top 15 Stocks (Dividend Yield-5YR)

1 MAX INDIA 12.15%
4 TATA POWER 6.75%
5 OIL INDIA 5.38%
6 BHEL 5.21%
8 ONGC 4.12%
10 Asian Paints 4.00%
11 NMDC 3.46%
12 SJVN LTD 3.45%
13 NTPC 3.21%
14 CIL 3.15%

Top 15 Stocks (Dividend Growth)

SL Company Growth Rate in Last 5 Years
1 BLUE DART 118.72%
3 PIRAMAL ENT. 57.60%
4 MIND TREE 52.87%
5 CIL 52.65%
7 MARICO LTD 43.39%
8 Tech Mahin. 41.72%
9 WOCKHARTD 41.42%
11 NMDC 37.18%
12 BHARAT FORGE 33.90%
13 ARVIND 32.37%
14 HAVELS INDIA 31.31%
15 DIVIS LAB 27.23%

Top 15 Stocks (Dividend Increase-5Yr.)

SL Company Dividend Increase Every Yr.
3 CIL Yes
5 NMDC Yes
8 ACC Yes
11 Bajaj Auto Yes
13 HPCL Yes
15 GAIL Yes

Top Dividend Paying Stocks in India in 2015

SL Company Current Price Dividend Yield - 10Year Average Dividend Yield - Current Year
1 NMDC 135 11.18% 6.30%
2 Oil India 535 5.55% 4.02%
3 Indian Oil Corporation 340 2.99% 2.56%
4 Steel Authority of India 79 3.34% 2.56%
5 Tata Power 79 9.67% 1.81%
6 Hindustan Petroleum Corporation 589 1.74% 2.63%
7 ITC 350 2.12% 1.71%
8 BHEL 260 5.71% 1.09%
9 BPCL 668 1.64% 2.54%
10 Hero Motocorp 2900 1.66% 2.24%
11 Castrol India 509 2.43% 1.38%
12 DLF 134 1.70% 1.49%
13 Hindustan Unilever 885 0.96% 1.47%
14 Asian Paints 828 2.65% 0.64%
15 Mahindra and Mahindra 1241 0.96% 1.13%
16 RIL 844 1.06% 1.02%
17 Container Corporation of India 1358 1.25% 0.91%
18 TCS 2490 0.71% 1.29%
19 Titan Company 371 2.00% 0.57%
20 Dabur India 236 0.70% 0.74%
21 Nestle India 6676 0.59% 0.73%
22 GlaxoSmithKline Consumer Healthcare 5706 0.43% 0.79%
23 Grasim Industries 3540 0.68% 0.59%
24 Zee Entertainment Enterprises 362 0.54% 0.55%
25 Pidilite Industries 539 0.50% 0.50%
26 Cadila Healthcare 1645 0.38% 0.55%
27 Bharat Forge 983 0.42% 0.46%
28 Procter and Gamble Hygiene and Health Care 6070 0.41% 0.45%
29 Sun Pharmaceutical Industries 836 0.82% 0.18%
30 Aditya Birla Nuvo 1727 0.33% 0.41%
31 UltraTech Cement 2806 0.19% 0.32%
32 Maruti Suzuki India 3467 0.17% 0.35%
33 Adani Ent. 497 0.18% 0.28%
34 ABB 1271 0.33% 0.24%
35 Glenmark Pharma 728 0.14% 0.27%
36 Shree Cements 9223 0.13% 0.24%
37 Eicher Motors 14745 0.09% 0.20%
38 Larsen and Toubro 15200 0.11% 0.09%
39 United Spirits 3098 0.07% 0.00%

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  1. Thanks for sharing this information here. It becomes always profitable if you pick best dividend paying stock in India. As you can get high return in this way. In.dividendinvestor.com is free online portal that I use mostly to track dividend data and high dividend paying stocks in India.

  2. thank for this list i am waiting for this list but i can not find it ! Now i am very happy thank you ! , i lost to much in market so now i will go for this.

  3. Please check the dividend yields again. I track some of these stocks and the yields are not correct. Asian Paints 4.95%. This is a high PE stock and always traded at 1-1.5% yield for past 3-4 years. Axis Bank 4.53%. Axis bank always traded at 1-1.5% yield for past 3-4 years. 4.53% yield is impossible for a private bank stock. If these two are incorrect I suspect others might not be right as well. Please check again. Thanks.

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