In this article we will tell you about best dividend paying stocks in India. Before moving further there must be some questions in your mind like
What are dividends?
How do dividends work and how do investors get dividends?
Which are the best dividend paying stocks in India ?
Retail investor should invest in dividend paying stocks ?
What are dividends
Dividends are rewards a company gives to its shareholders from its profits. And paying dividends is a mandatory corporate actions. When the company announces it, you receive it in your bank account.
There is a date called the dividend declaration date. It’s the date the company announces the dividends.
Then there is an Ex-date. It means if you’re the shareholder of the company on that date, only then you’re entitled to the dividend.
Then there is the record date. On that date, the company review its register and list down all the shareholders eligible for the dividend.
Then there is the dividend payout date. On the dividend payout date, you receive the dividend announced by the company.
Now consider there is company A, who earns a profit of Rs. 100 cr every year, Now after earning the profit the company have the options – either company can reinvest the profit in their business to expand it or secondly share the profit among the shareholders.
The third option is company will distribute some part of profit to their shareholders and will use the remaining to grow the company. Now you must be thinking is it mandatory for a company to pay dividends No. Company can use the total profit to grow or expand the company.
List of top dividend paying stocks
Now I will tell you the name of those five companies Who have given their shareholders a lot of dividends.
The first name that comes in this list is Vedanta. Vedanta is a very big company whose business is spread out in many sectors. If I talk about its market cap Then its market cap is around 53 thousand cr.
In the past year Vedanta has given a dividend of Rs. 18 to its shareholders If I talk about its dividend yield Then the dividend yield comes out to be 13% .
Now if we talk about Share price performance, Vedanta’s share In the past year has come down around 26%. So, if we talk about Vedanta’s net return in the past year, from the price we get a loss of 26% We get a dividend yield of 13% The loss that Vedanta has given in the past year is -13%. If I compare this to NIFTY’s performance So NIFTY 50 in the past year Has given a return of almost 10%.
Now I will talk about the second company And the second company is BSE ltd Now after listening to this, you might get confused That BSE is an exchange So how did they pay dividend So, BSE ltd is also a stock, That trades at NSE And BSE’s stock doesn’t trade at BSE But it trades at NSE.
In the last year BSE has given a dividend of Rs. 30 If I talk about dividend yield Then the dividend yield is around 6% If we talk about a 1 year return, It has given a -18% return. So the net loss that BSE has given its shareholders is around -12%.
The third company is Coal India The IPO of Coal India was India’s biggest IPO. it is a public sector company. If I talk about dividend then in the past year, Coal India has given a Rs. 30 return And its dividend yield is around 6.8%. If I talk about price Then its performance in price in the past year has been -20%.
REC (Rural Electrification Corporation)
The fourth company in this list is REC Rural Electrification Corporation. The company’s main objective is to finance and promote rural electrification projects all over the country. It provides financial assistance to State Electricity Borads, State Government Departments and Rural Electric Cooperatives for rural electrification projects all over the country. If I talk about dividends then in the past year, this company has given a dividend of Rs. 11 Per share Then it’s dividend yield is around 8%.
But if we talk about price performance, then in the past year The price performance of this company has been +30% . So in the past year Given a net return of around 38%.
IOCL (Indian Oil Corporation)
The fifth company in this list is IOCL, this is an oil marketing company Which is owned by the government. If I talk about the dividend payout, in the past year company has given a dividend of more than Rs 9 and dividend yield was around 7%.
If we talk about price performance Then the price performance of this company is -7% , So the net return of this company is: (-7% + 7.42%) , So this company has given a mild positive return in the past year.
Retail investor should invest in dividend paying stocks ?
Now the big question is a retail investor should invest in these dividend paying stocks ? the answer is those people, Who don’t want to invest in volatile stock and can’t take price risk and also want a stable income, for them, dividend paying stocks are very good. Because benefit of dividend is , the company pays you dividend at regular intervals.
The second type of company is , who keep a lot of growth capabilities in the coming time, They don’t pay their profit to shareholders, those companies re-invest their profit into their company or in other sectors where expansion is possible, they expand themselves in those sectors.
Now in the mind of every investor there must be a question, do we also need to pay tax on the dividends what we get. Because if we get a return from stocks in long term then we have to pay capital gain tax, The answer is for investors, dividend is a tax free income Because the tax for that is paid at the company’s level And whatever dividend you get in hand You get in your bank account, It is completely tax free.
So, First, If you want a fixed income and you don’t want to take much risk Then maybe for you high dividend paying stocks are really good.
But if any investor wants to invest aggressively Who wants to invest in growth stocks Then maybe dividend paying stocks won’t be good for him.
That’s the end of this article “5 best dividend paying stocks in India “, If you find this article informative then don’t forget to share it with your friends and on social media platform.