Highest Dividend-Paying Stocks in India

Highest Dividend-Paying Stocks in India

The sole purpose of investing in the stock market is to gain profit and increase your wealth. But there is not only one way to do the same. There are different groups of investors, different from each other based on their investment ability, financial goals, knowledge, and risk appetite. 

Some wish to increase their wealth in a short period, while others prefer to invest strategically, target long-term returns, and gain steadily from their investments. This latter group has a part that prefers investing in stocks that apart from being of high quality, also disburse regular and high dividends. This is a part of value investing. If you are the one looking to pick the best dividend-paying stock in India, this article is for you.

What will we learn?

  • Definition of best dividend-paying stock
  • Factors to keep in mind before investing in dividend-paying stocks
  • Top dividend-paying stocks to invest in 2022
  • How to maximize returns from dividend payout?


What Are Dividend-Paying Stocks?

Do not all stocks pay dividends? No, not all companies pay dividends to their equity shareholders. The first thing is to earn profit. Dividends are disbursed from the amount of profit the company earns. If a company is not profitable at all, its shareholders may not get any dividends. Furthermore, it is not necessary that a profitable company is obliged to disburse dividends, the sole decision of announcing dividends remains with the company itself. The last part is even if the company payout dividends, how much do they do? Is it any worth in comparison to the price of the company’s stock?

The stock that fills out all these checkboxes becomes the best dividend stock in India. There are a number of highest dividend-paying stocks in India, which we will come to know pretty soon. However, before that let us learn some crucial points that you should keep in mind before investing in any dividend stock.

Key Insights

  • Dividend payments should be the sole criteria for selecting stocks
  • When it comes to dividends, check the dividend yield and dividend growth of the stock
  • Keep yourself updated with dividend announcements of various companies


Things to Keep in Mind While Investing in Best Dividend Stocks

It is not that difficult to find the best dividend-paying stocks in India, you will get the same in this article only. But one should not pick up dividend-paying stocks blindly. Let’s go through the checkpoints before investing in good dividend-paying stocks.

Dividend Is Not Omnipotent for a Stock to Be Good

First of all, your investment strategy should not be focused solely on dividend-paying stocks, rather, you should buy high-quality stocks in general. This means that it is good to keep dividends as one of the parameters to pick stocks for your portfolio but that should not become a decisive check. Not all high dividend-paying stocks are good and there is no guarantee whether they will perform well in the future or not. 

Profit and Dividend

As we know that a company pays dividends from the profit it makes every quarter or year. A company paying a high dividend can mean that a large part of its profit is going into the hands of shareholders and only little remains to reinvest back into the business. This translates into low capital reinvestment and subsequently decreases the chances of growth in the future. If the growth is hampered, it will directly send ripples across the stock price, and in the end, you may get good dividends but will incur capital losses. Hence, it is necessary to evaluate how well the company is doing to manage a subtle balance between dividend payouts and still save much to promote its business growth.

Dividend in Not Guaranteed

A company paying your dividend, for the time being, does not necessarily mean that it will be able to pay for eternity. As learned, dividends and the number of dividends paid depends on the company’s profit, and how its board wants to disburse dividends. Hence, you should not make earning dividends the sole objective of your investment.

Dividends Should Not be Prioritized Over Capital Growth

Even if you invest and earn from the top 10 dividend-paying stocks in India, the amount earned will not suffice your investment expectation. Take a benchmark and see whether your investments are able to return more than that. For example, if your total returns (capital gain + dividends) are not more than the average annual returns Nifty has given over the years, you should revisit your investment strategy for improvement.

So the best would be to pick top dividend-paying stocks in India from a filtered list of top stocks to invest in general. For you, we have compiled a list of top dividend-paying stocks that you can consider for your portfolio.

Top 10 Dividend Paying Stocks in India in the Last 3 Years

NameMarket Cap (Rs, Cr)PE RatioDividend Yield (%)Sector
Vedanta Ltd85,4634.5519.51Metals - Diversified
Indian Oil Corporation Ltd97,0133.8611.92Oil & Gas - Refining & Marketing
Power Grid Corporation of India1,45,2648.6311.88Power Transmission & Distribution
Coal India Ltd1,08,9886.289.61Mining - Coal
Oil and Natural Gas Corporation1,69,0793.717.81Oil & Gas - Exploration & Production
Hindustan Zinc Ltd1,08,88611.316.98Mining - Diversified
Tata Steel Ltd1,05,2082.625.92Iron & Steel
Bharat Petroleum Corporation Ltd63,0425.405.31Oil & Gas - Refining & Marketing
Indus Towers Ltd56,4208.855.25Telecom Infrastructure
NTPC Ltd1,33,0877.985.10Power Generation

(Note: Data as on June 21, 2022)

What all is taken care of in the list?

  • The list contains the top dividend-paying stocks with other factors like market cap, PE ratio, etc., taken into consideration.
  • It contains stocks from a range of industries, which will help you in diversification.
  • You can make a similar list of the highest dividend-paying stocks in the last 10 years in India by using a stock screener.

Also an update: We have launched US stocks SIP.

This is one of the most popular feature requests by Indian investors who have been investing globally. If you invest in SIP in mutual funds, you know how powerful it is. Following the same SIP feature, we have launched the US Stocks / ETF SIP feature that lets you invest a fixed amount in any US stocks or ETF on a weekly or monthly basis - even as low as Rs. 500. This averages out your cost of investing and benefits from the power of compounding.  

More details here! Now you can start SIP in any of the US Stocks, as low as Rs. 500, and even set up a weekly SIP frequency - check out the US stocks 

How to Pick the Best Dividend Stocks in 2022?

We have prepared a checklist for you to maintain while looking to invest in dividend-paying stocks →

Check Dividend Yield

Dividend yield shows how much dividend the company has paid out in a year. It basically shows you the ratio between the dividend earned to the amount of capital invested. It is one of the popular ways of evaluating whether the company is disbursing dividends as per your expectation or not and whether combining the same to capital growth is decent enough or not.

Evaluate Dividend Growth

Although dividend growth should be considered in isolation, it does the job when other factors are also taken into account. Investing does not only mean getting the same amount of dividends every year. There should also be growth in the dividend payout. You can use a stock screener and sort out the dividend-paying stocks on the basis of the growth in the payouts.

Keep Yourself Up-to-date With Dividend News

You may have seen a phenomenon- whenever a good company is about to announce dividends, there is a sudden rise in its stock price due to heavy buying. This is because investors want to accumulate a higher number of stocks to earn from the dividend in a short period of time. You can capitalize on such opportunities and pick up stocks that are fairly valued to invest in. 

For this, you have to keep a track of the following things:

Ex-dividend date: This is the day by which you need to complete the purchase of shares in order to become eligible for receiving the upcoming dividend. The ex-dividend date is usually 1-2 days before the record date. 

Record date: This is the day when you become eligible to receive dividends. 

For example, if the ex-dividend date of a stock is July 21, 2022, you have to complete the purchase before that date. For this, you should buy stocks at least 2-3 days early as it takes some time to get the same settled in your Demat account.

Keeping all the above explanations in mind, you can also find out the best dividend-paying stocks in 2022. However, make sure that you pick stocks that also give you capital appreciation and allow you to build a solid corpus in the long run. To keep yourself updated with dividend news follow INDmoney!

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