Upcoming Dividend Stocks in 2023

In recent years, Indian corporations have been more conservative with their dividend payouts, frequently choosing to reinvest revenues back into the business. Nonetheless, certain industries, such as Public Sector Units (PSUs) and fast-moving consumer goods (FMCG) firms, have a strong dividend payment ratio.

Dividends remain a crucial consideration for Indian stock market investors today, offering a real return on investment as well as a signal of a company's financial health and stability.

What is a dividend?

A shareholder gains from stock ownership through capital appreciation, which is the increase in share price, or through dividends—regular payments companies distribute from their profits, usually as cash, stocks, or other assets.

The benefit of investing in Dividend Stocks:

Putting your money into dividend stocks is like having a two-for-one deal. It's a way for you to see your money grow over time, as the value of the stock increases, and also get a regular paycheck, since these stocks pay you a part of their earnings regularly. Imagine you buy a stock that pays high dividends; it’s like getting a steady stream of cash for years. And when you're ready, you can sell that stock and, if all goes well, end up with more money than you started with – a neat and tidy profit.

What is Record Date?

The record date, which is set by a company's board of directors, is the date on which the company compiles a list of shareholders of the stock for which it has declared a dividend. This list is used to determine the shareholders entitled to receive the dividend.

In addition, a record date is used to determine who should receive stock reports, financial reports, Proxy statements, and other financial information relating to the company and its stock. The record date, along with the ex-dividend date, is important for investors to know to ensure they're eligible to receive the dividends they seek.

What is Ex-Date?

The date determines which of these shareholders will be entitled to receive the dividend. Typically, the ex-dividend date is set one business day before the record date. Shareholders who bought the stock on the ex-dividend date or after will not receive a dividend. However, shareholders who owned their shares at least one full business day before the ex-dividend date will be entitled to receive a dividend.

Upcoming Dividends Payout in 2023

Factors to consider while investing in dividend stocks:

 

1. Dividend payout ratio: The dividend payout ratio shows what portion of a company's net income is given to shareholders as dividends. For example, if a company earns Rs 100 million and pays Rs 20 million as dividends, the ratio would be 0.2, or 20%. This means the company is giving 20% of its profits back to its shareholders.

The dividend payout ratio indicates how much of a company's earnings are paid to shareholders. However, it's just one aspect to consider. Investors should also look at market conditions, the company’s growth stage, reinvestment needs, stock market perception, and other factors for a complete view of the company's health, not solely the dividend payout ratio.

2. Dividend yield: The dividend yield ratio shows the annual dividend payment a company makes compared to its current stock price. It helps investors assess the income they might earn relative to the price of the stock. Generally, investors seeking income may look for stocks with a yield of at least 3-4%.

Stocks with a very high dividend yield, like 10%, can be risky as they might indicate a potential future cut in dividends. Investors should diversify and not solely pick high-dividend-yielding stocks, as this strategy could lead to losses in the future.

3. Dividend coverage ratio: The dividend coverage ratio shows how many times a company can pay its dividends to shareholders using its net income for a certain time period. Usually, a higher ratio is seen as better, suggesting the company can comfortably afford its dividends.

When a company pays more than 50% of its earnings as dividends, it might have less room to increase those dividends in the future. Investors often prefer companies that pay a smaller portion of their earnings as dividends, as this may suggest more potential for dividend growth.