Traders almost often shy away from dividend paying stocks and go for tradable options. The reason might be that dividend yields are somewhat smaller, turning in 1-2% whereas the digits are often in double when it comes to capital appreciation.

But that doesn’t necessarily undermine the worth of “dividend.” With capital appreciation, there are associated risks and volatility. This makes them unpredictable. But when it comes to dividend income, they are more predictable and rational.

There are narratives around companies that pay a high/low dividend, often getting highlighted in the news. But why is it so that the investors should be paying heed to such narratives? So, before we ask why dividends are so significant, it is imperative that we first understand what dividends are.

Defining a Dividend

A dividend is a distribution of a part of a company’s earnings.The company’s board of directors decides when and how much dividend to allocate to a specific class of the company shareholders.

Dividends can either be issued through cash payments or as stock shares or as property. Generally, most of the companies give out Dividends twice a year i.e., interim and final dividend. But this doesn’t necessarily count as a rule since few companies such as MRF gives out Dividends thrice a year.

When a company turns over its profit, it can use this profit in various ways. They can either implement the amount for further expansion like acquiring properties, opening up a new project/venture et al. Or they can choose to distribute their profile amongst their shareholders and owners.

The final option which they can go for is the distribution of a portion of that profit to their shareholders, and implement the rest for expansion or some relevant projects.

Few financial terms surrounding Dividends that you should know of

Dividend Yield 

It is the portion of the company’s earning that gets distributed to their shareholders.

A dividend yield of a stock can be calculated with respect to the company’s annual capital dividend per share divided with the present price of the stocks, expressed in yearly percentage. It can also be distributed annually or quarterly which can be issued either in cash or stocks. 

  • Dividend Percentage 

It is defined as the ratio of a dividend given by the concerned company to its share’s face value. 

  • Payout Ratio 

It can be defined as the proportion of the earnings paid either as a dividend to the company’s shareholders or just expressed typically in percentage. Furthermore, the ratio is calculated with respect to the DPS or Dividends Per Share divided by the EPS or earning per share. 

Note: As a rule of thumb, always avoid investing in companies that have a higher payout ratio, especially if that ratio is 70% or above. 

Why should you go for dividends? 

While capital appreciation incurs double the figure dividends have to offer, it still is more volatile and has associated risks. Unlike capital appreciation, dividends tend to be more stable and are predictable too. For instance, you have been a long-term investor and have invested in particular company stock for over 15 years.

Now, if that company decides not to shell out its dividends, then you’d have no alternative way of making money unless you are selling these stocks. On the other hand, when a company is providing a consistent dividend for over ten consecutive years, you can rely on that company and label it to be stable.

Be wary of the companies that skip dividends or dishes out irregular dividends since they most likely to be less stable. 

Four reasons why you should favor dividends 

  • Your assets are visible and can be predicated upon. Hence, predictability gives you a sense of power and control over what you have. As opposed to capital appreciation, investors feel more contained while dealing with dividends. 
  • Dividend investment focusses primarily on regularized income even when their yield is low. 
  • If rules are implemented properly, dividend investments are nearly foolproof. Evidently, the chances of loss are highly unlikely for the investors. 
  • Pro investors endorse dividend investing only when there’s a high growth rate. 

Here are the Best Dividend Paying Stocks In India as of now

With the fundamentals being clear, now you can focus on investments and where to invest. The growing companies give out lesser dividend yield as they use their profit amount on expansion and other projects related to their company.

Some public sector companies such as petroleum and oil companies dish out regularized dividends. But the blue-chip companies which are already established and have reached their saturation point, shells regularized dividends. 

Here’s a comprehensive list of the top 10 dividend paying stocks (highest). 

#1 Wall Street Financial Limited 

WALL Street Financial LTD. was incorporated in the year 1986. The present market capitalization cumulatively stands at 32 Crore INR. This company has been listed on the BSE or Bombay Stock Exchange and in NSE (National Stock Exchange) as well.

They have their business operating overseas in foreign exchange segments. It is also does businesses like traveler’s check, forex digital et al. This company has a low market capitalization, belonging to the small-cap sectors.

The stock also experiences high volatility in its share price. The company shells out good dividend yields which essentially is to stick their investors with them.  

Fundamental aspects 

  • Market cap is INR 32 crore. 
  • EPS(TTM) is at 0.10 INR
  • Book value is at 33.82 INR 
  • Face value is at 10.00 INR
  • Dividend Yield is at 0.8115.51%

#2 Vedanta 

Vedanta Ltd. was incorporated in the year 1965 and is a Metal/ Non-Ferrous company. Their market capitalization is currently at 62337 Crore INR. The company has both been listed in NSE and BSE respectively.

They are responsible for the business of commercial gas and power along with iron and aluminum ores. Their reputation has largely been due to their parent company i.e. Vedanta Group.

They have consistently been performing well in the last five years. In addition to this, their stock trade is near to its book value which provides a great opportunity to invest. The dividends have largely been consistent with them. 

Fundamental aspects 

  • Market cap is INR 62,337 Cr INR
  • EPS(TTM) is at 19.01 INR
  • Book value is at 166.92 INR
  • Face value is at 1.00 INR
  • Dividend Yield is at 1.0011.24%

#3 Shervani Industries 

Established in the year 1948, Shervani Industries have dealt with construction and real estate. They are registered both in NSE and BSE respectively. Shervani has a current market capitalization is at 144 crore INR with a dividend yield of 2.2315.97%.

Fundamental aspects 

  • Market cap is INR 144 crore. 
  • EPS(TTM) is at 126.06 INR
  • Book value is at 238.88 INR 
  • Face value is at 10.00 INR
  • Dividend Yield is at 2.2315.97%

#4 National Steel & Agro Industries Ltd. 

They primarily deal with iron and steel products and are in business since 1985. The company is registered both in NSE and BSE respectively. Their current capitalization stands at INR 14 crore with a dividend yield of -0.0215.87%.

The company has unfortunately been delivering poor growth which also might be the reason why they are paying healthy dividends to their investors.

Fundamental aspects 

  • Market cap is INR 14 crore. 
  • EPS(TTM) is at -54.03 INR
  • Book value is at -169.62 INR 
  • Face value is at 10.00 INR
  • Dividend Yield is at -0.0215.87%

#5 National Aluminum Company Limited 

They deal with aluminum products since 1981 with a standing market cap. of 8834 crore INR. NACL registered both in NSE and BSE respectively. They have always been in the good books financially. Consequently, the stock is trading high and is projecting a good growth spurt with a dividend yield of 0.8412.04%. 

Fundamental aspects 

  • Market cap is INR 8834 crore. 
  • EPS(TTM) is at 9.29 INR
  • Book value is at 56.12 INR 
  • Face value is at 5.00 INR
  • Dividend Yield is at 0.8412.04%

#6 Procter & Gamble Health Ltd.

They are into the pharmaceutical industry and launched in the year 1967. They are registered both in NSE and BSE respectively. Their current market cap is at 7079 crore INR with a dividend yield of 10.32%. 

Fundamental aspects 

  • Market cap is INR 7,079 crore. 
  • EPS(TTM) is at 77.19 INR
  • Book value is at 952.33 INR 
  • Face value is at 10.00 INR
  • Dividend Yield is at 10.32%

#7 Ingersoll Rand 

They deal in compressors and pumps and have been established in 1921. They are registered both in NSE and BSE respectively. The current market cap is 1949 crore INR. They are likely to pay a higher dividend with a dividend yield of 4.0660.49%

Fundamental aspects 

  • Market cap is INR 1949 crore. 
  • EPS(TTM) is at 25.64 INR
  • Book value is at 132.59 INR 
  • Face value is at 10.00 INR
  • Dividend Yield is at 4.660.49%

#8 Indian Oil Corporation 

They deal with oil refineries, exploration, pipeline, production and was incorporated in the year 1959 with a current market cap. of 138012 crore INR. They are registered both in NSE and BSE respectively.

Overall, IOC is a well known Maharatna company. It has grown consistently over the last five years. Their dividend yield is at 1.2214.32%

Fundamental aspects 

  • Market cap is INR 1,38,012 crore. 
  • EPS(TTM) is at 18.46 INR
  • Book value is at 119.72 INR 
  • Face value is at 10.00 INR
  • Dividend Yield is at 1.2214.32%

#9 Hind Zinc 

Hind Zinc, popularly known as HZL deals with integrated mining & is a resource producer of lead, silver, cadmium, and zinc. They are a subsidiary of Vedanta Resources PLC. and is also the second-largest producer of zinc.

They are registered both in NSE and BSE respectively. Their current market cap is at INR 96189.39 crore with dividend value of 9.79%. This has been operational in the year 1966 as a part of the public sector undertakings. 

Fundamental aspects 

  • Market cap is INR 96189.39 crore. 
  • EPS(TTM) is at 18.83 INR
  • Book value is at 79.53 INR 
  • Face value is at 2 INR
  • Dividend Yield is at 8.79%

#10 21st Century Management Services Limited 

They are a Finance investment company incorporated in the year 1986 with a market cap. Of 22 Crore INR. They are registered both in NSE and BSE respectively.

This company is from the small-cap sector and engages in investments in capital future, market and funds. The net profit of this company has been declining but still has a decent dividend yield percentage of 11.68%

Fundamental aspects 

  • Market cap is INR 22 crore. 
  • EPS(TTM) is at -18.64 INR
  • Book value is at 38.42 INR 
  • Face value is at 10.00 INR
  • Dividend Yield is at 11.68%

Verdict 

There is a high chance of increased yields if you are reinvesting in the dividends earned. However, the investment should be systematic in order to accumulate their invested dividend stocks.

Only then can you reinvest upon your earned dividend. Dividend stock provides small scale investment benefits that are similar to interests deposited by banks. 

Stocks that pay a higher dividend are usually small-cap while some may also be from the mid-cap segments.

So, there are risks associated which should be assessed with the fundamentals of investment.

It all comes down to the motive a company shares and how you are able to deduce it. This list, however, should bring in some insight into investment opportunities for dividend stocks.

Furthermore, the stocks mentioned here are currently on the top 10 which already sorts out the ones you should be looking into. However, it is advisable that you do some research before finalizing your investment choices.

The research should likely pertain to current share prices, market capitalization and the dividend yield percentage each stock is offering. It is important in this regard that you understand the dynamics of these companies and their respective stocks before you invest.

Not every stock that you invest in will be paying you dividends but the ones cited here in this curated list will.