Understand these 5 Best Dividend Paying Stock In India before you regret

Best Dividend Paying Stock In India: There are so many stocks that regularly pay dividends. In this article, we are going to look at some Best Dividend Paying Stock In India.

Along with technical, We will also consider insight, fundamental and business plan of the company. If you are nearing these best dividend-paying stock in India or want to invest in them then you can look For pros, cons, insights, and business plan plans companies here

There are e a lot of investors who make a considerable profit just by investing in the Dividend Paying stock.

Here we have evaluated stocks that regularly pay dividends. The financial condition, future, and business model of the companies are also kept in consideration.

But before browsing, please understand some basic essential ratios that will help you in analyzing the best Dividend Paying Stock In India.

Know “What is Dividend Investing?” here

Basic Essential Ratios

CAGR (Compounded annual growth return)

It means the percentage of returns on your initial investment is calculated yearly. In layman’s terms, if you invested100 rupees in 2015 and that grows to ₹200 in 2017 then your returns are 100% but your annual returns will be 41.42%. This is how compounded annual growth returns are inferred.
The formula for compounded annual growth returns
CAGR = [(Final value/Initial value)^(1/n)-1]×100

DPR (dividend payout ratio)

It is simply the ratio of the amount of money a company earns to the amount of month the company pays as a dividend.
mathematics formula for DPR
= (Dividend per the share/earning per share)×100
If company earn ₹1000 and pay ₹500 as a dividend then its dividend payout ratio will be 50%

DDR (Dividend declaration ratio)

It is similar to dividend payout ratio where dividend per share is in ratio with a face value of a share and not the earning per share
Dividend declaration ratio formula
=(dividend per share/ face value of share)×100
Whenever you listen to the news that the company has declared a 500% or 200% dividend then they are talking about the dividend declaration ratio which is calculated on the face value of the company.

Dividend yield

A company uses the dividend declaration ratio to declare the dividend but in general when you have to invest in a company or want returns from dividend investing then you have to consider dividend yield as it is calculated depending on the market price of a share and not face value.
The formula for dividend yield= (dividend per share/market price)

While considering best dividend paying stock in India we have selected DY as one of the major factor.

ROCE (return on capital employed)

The formula for return on capital employed
= [Earning before income and taxes/total capital employed (equity+debt)]×100

ROE (return on equity)

The formula for return on equity=(Net income/Shareholders equity)×100

Debt to equity ratio

The formula for depth to equity= ( Total debt/total equity)
Ideally, debt to equity ratio should be less than one. It means that the company has enough equity to pay its debt.
If it is less than one then In times of recession a company is likely to survive in better a position than companies with high debt.

Companies that required capital for their functioning life banks, construction, power generally have high debt to equity compared to companies requiring low capital for their functioning like retails, software, consulting.
So while considering the debt to equity ratio you should compare the company with its competitors in the same sector or category.

Let’s get back to our main topic of the best dividend-paying stocks in India. Instead of having a list of dividend stocks we have specifically select some of the stocks in India with some specific criteria like

Regular dividend payout
Well established company and business plan
Profit from regular dividends as well as capital appreciation
Companies with less risk and safety to capital
The dividend yield is the major factor that is kept into consideration

Best dividend paying stock in India.

Bajaj Auto

Best Dividend Paying Stock In India bajaj logo

Bajaj Auto deals in 2 Wheeler and 3 Wheeler sectors. The brand Bajaj Auto is internationally recognized for its famous model of the pulsar and many more. Bajaj Auto is the world’s 4th largest 2 Wheeler and three Wheeler manufacturing company. It dominates three Wheeler manufacturing sectors in India.

Bajaj Auto alliance with KTM and dealing in the electric vehicle sector with its newly launched chetak bike gives an increased competitive edge over competitors
Threat to Bajaj Auto

It is a cyclic industry which means in the recession it sales decrease and returns from the company reduce and vice versa it increases if the economy is growing.

Technicals of Bajaj Auto

CAGR:- 5%
dividend yield:-3.3%
ROCE:- 21%
ROE:- 7%
Market cap:- 121577 crores
Debt to equity:- 0

GAIL

It is also known as the gas authority of India limited. GAIL has its dominance in the gas transmission business. Where it dominates around 70% of the total gas transmission market.
It has a widespread pipeline network of around 13389 kilometers.

The main business of GAIL is energy production and non-electricity utility. GAIL deals in natural gas production, liquid hydrogen, LPG transport, exploration and production of natural gas, electric generation.

With the increase in consumption, it is expected that natural gas consumption will increase from 58 million tonnes in 2018 to 143 million tonnes in 2040. As the company is capital intensive and having much more entry barriers, makes it other competitors difficult to enter this business.

The only cons with GAIL are the tariff are decided and controlled by government intervention.

Technicals of Gail

CAGR:- 22.55%
Dividend YIELD:- 3.28%
ROCE:- 8.99%
RoE:- 11.53%
market cap:- 67560 crore
debt to equity:- 0.13

Hindustan zinc

As the name indicates the company deals in the mining and smelting of zinc. It is the second-largest in zinc-lead mining and fourth-largest in zinc-lead smelting in the world.
For more clarification, mining is the process of mining out minerals and smelting the profitable extraction of minerals from their existing ores.

Hindustan Zinc has a market share of around 77% in India. The business of the company has low risk due to high entry barriers and limited zinc mines. Not solely in India but Hindustan zinc has played a global presence also.

As the Market for zinc and lead is growing rapidly, Hindustan zinc is ready to fulfill the demand for zinc and lead with its high resource mine and ensure extended mine life of over 25 years.

Even though the company is capital intensive but it does not have any long-term debt.
The major concern for Hindustan zinc is its revenue source. As 75% of its revenue only comes from the zinc-lead business. There is no diversification of revenue. Majorly the zinc-lead consumption of around 75 percent depends on galvanized steel sector only.

Technicals of Hindustan zinc

Dividend yield:- 6.23%
ROCE:- 28.95%
ROE:- 24.69%
Market cap 142520 crores
debt to equity:- 0.20%

ITC

ITC is a very well-known company for its dividend payout and its consistency. The company has a monopoly in the cigarette sector. It not only deals in cigarettes but also includes stationery, hospitality, paperboard, and packaging.

ITC dominates 70% of the cigarette market in India but its revenue source is highly diversified in its other products also. Recently ITC has acquired sunrise food private limited to strengthen its presence in the spices segment.

The popular branding of ITC, wide range of products product, strong distribution network, and impressive operating margin of 34.5% shows an incredible business plan of ITC.

Cons of ITC
There is a risk in the cigarette business due to increased taxes and high government intervention. Tough company is shifting its revenue source from cigarettes to FMCG, but it has high competitive pressure in the FMCG sector.

Technicals of ITC

CAGR:- 5.25%
ROCE:- 28.49%
ROE:- 21.8%
Dividend yield:- 5.28%
Market cap:- 250669 crore
Debt to equity:-0

IOC Indian oil company

IOC is India’s biggest energy oil supplier. A major part of petrochemical consumption in India is fulfilled by IOC. The company deals in the production of energy from petrol and diesel but due to the increase in focus on an electric vehicle, it can easily shift its energy production source from petrol and diesel to electricity.

The company was formed in 1954 by the merger of IOC limited and Indian refinery limited. The core business and motto of IOC is to fulfill and ensure the energy need of India.

IOC deals in LPG, petrochemicals, A and P, renewable energy, transportation products, and lubricants. The well famous and trusted lubricant brand SERVO is owned by IOC

IOC is the largest refinery in India. It has Dominance in Sri Lanka, malicious, and West Asia. Though the share prices of IOC is declining, the shareholding of promoters and mutual fund despite negative performance in past is stable. Foreign individual investors have also increased their investment in IOC

Technicals of IOC

Dividend yield:- 11.03%
ROCE:- 17.19%
ROE:- 19.34%
Market cap:- 102426 crores
Debt to equity:- 0.97

Read More – How to Live off Dividends? How to Grow Your Dividend Income?

The above-explained stocks are some of the Best Dividend Paying Stock In India. Here we have thoroughly discussed technical and fundamentals and the future of the company.

Hope you like a list of the Best Dividend Paying Stock In India. Before taking any investment regarding decision please consult your financial advisor. The information provided here is only for educational purposes.

Happy trading and investing!

FAQ on Best Dividend Paying Stock In India

What are the basic criteria to select Dividend Stock?

Regular dividend payout
Well established company and business plan
Profit from regular dividend as well as capital appreciation
Companies with less risk and safety to capital
Dividend yield is the major factor that is kept in consideration

What is mean by CAGR ?

(Compounded annual growth return)
It means the percentage of returns on your initial investment calculated yearly. In layman’s terms, if you
invested100 rupees in 2015 and that grows to ₹200 in 2017 then your returns are 100% but your annual
returns will be 41.42%. This is how compounded annual growth returns inferred.

DPR full form

dividend payout ratio

DPR Meaning?

It is simply the ratio of the amount of money a company earn to the amount of month the company
pays as a dividend.

DPR formula

(Dividend per the share/earning per share)×100

DDR full form

dividend declaration ratio

DDR Meaning?

It is similar to dividend payout ratio where dividend per share is in ratio with a face value of a share and
not the earning per share

DDR formula?

=(dividend per share/ face value of share)×100
Whenever you listen to the news that the company has declared a 500% or 200% dividend then they are
talking about the dividend declaration ratio which is calculated on face value the company.

Dividend yield?

As company use dividend declaration ratio to declare the dividend but in general when you you have to
invest in a company or want returns from dividend investing then you have to consider dividend yield as
it is calculated depending on the market price of share and not face value.

Dividend yield formula

(dividend per share/market price)×100

Strength of Hindustan Zinc

Hindustan Zinc has market share of around 77% in India. The business of company has low risk due to
high entry barriers and limited zinc mines. Not solely in India but hindustan zinc has play global presence
also.
As Market for zinc and lead is growing rapidly, hindustan zinc is ready to fulfil the demand for zinc and
lead with its high resource mine and ensure extended mine life of over 25 years.
Even though the company is capital intensive but it does not has any long term debt.

Strength of ITC

ITC dominates 70% of cigarette market in India but its revenue source is highly diversified in its other
products also. Recently ITC has acquired sunrise food private limited to strengthen is presence in spices
segment.
The popular branding of ITC, wide range of products product, strong distribution network and
impressive operating margin of 34.5% shows an incredible business plan of ITC.

Strength of IOC

IOC deals in LPG, petrochemicals, A and P, renewable energy, transportation products and lubricants.
The well famous and trusted lubricant brand SERVO is owned by IOC.
IOC is largest refinery in India. It has Dominance in Sri Lanka, malicious and West Asia. Though the share
prices of IOC is declining but the shareholding of promoters and mutual fund in spite of negative
performance in past is stable. Foreign individual investors has also increases their investment in IOC

Strength of GAIL

GAIL has 70% dominance in gas transmission business.
Widespread pipeline network of around 13389 kilometre.
With increase in consumption it is expected that the natural gas consumption will increase from 58 million tonnes in 2018 to 143 million tonne in 2040.
As the company is capital intensive and having much more entry barriers, makes other competitors difficult to enter in this business.

Default image
Divyanshu Lad

Subscribe TechTars

If you like what you just read then subscribe us for investment strategies and tricks.

Leave a Reply