Article

High Dividend Yielding Stocks

15 Apr 2020 Nikita Bhoota

Investors in the stock market have different the risk appetite and financial goals. People with high risk-taking capacity invest in stocks that offer capital appreciation and involves more risk. On the contrary, investors with low risk appetite invest in high dividend yielding stocks which give stable income.  Moreover, when markets are facing a downturn, dividend stocks usually do not get into a free fall, and likely to outperform most of the time. 

Dividend yield is the annual return which the stock pays in the form of dividends. Dividend yield is calculated by dividing the dividend per share (DPS) by current market price (CMP).

The Indian equity markets Nifty 50 and Sensex are down 18.2% and 18.3% respectively from March 02, 2020- April 09, 2020. Fear of worldwide slowdown due to the aggressive spread of coronavirus (Covid 19) disease has affected investors’ confidence. Moreover, Post the Rs 1.7 lakh cr stimulus declared by the finance minister, expectations are high from the Reserve Bank of India to slash interest rates.

Therefore, high dividend yield stocks are worth investing in wake of falling interest rate scenario. Additionally, investing some of the corpus in high dividend-yield paying companies with strong fundamentals can cushion investors’ portfolios in case of an event of a fall but only to an extent.

Based on historical dividend yields following are some of high-dividend yielding stocks.

Company Name

Dividend Yield (%) FY19

3 years average Dividend Yield (%)

SJVN Ltd.

8.9

7.8

REC Ltd.

7.2

6.6

NLC India Ltd.

6.5

6.2

NHPC Ltd.

5.9

5.5

Indian Oil Corporation Ltd. (IOCL)

5.7

7.5

Hindustan Petroleum Corporation Ltd.

5.6

5.4

Coal India Ltd. (CIL)

5.5

6.0

Oil India Ltd.

5.5

5.6

Source: Ace Equity

The above- listed companies are some of the high dividend yielding companies on a consistent basis. 3 years average dividend yield for SJVN, REC, IOCL, Coal India and Oil India stood at 7.8%, 6.6%, 7.5%, 6% and 5.6% respectively. SJVN is a power generation company, operates hydro, wind and solar plants. CIL has leading position in coal mining and produces 80% of the country’s coal output. 

Most of these high dividend-paying companies have healthy cash reserves which could be utilized for paying dividends in difficult times as well when the core businesses get impacted.  Investing in high dividend yielding stock in a falling market sounds wise, but the investor should prefer investing in the companies that are fundamentally strong and have appreciated a little in the recent past months. There have been examples of loss of invested capital, hence the investor must ensure that he should not end up into value trap in the chase of high dividend. Thus, high dividend yielding stocks with strong fundamentals can be a safe investment bet in times of uncertainty in the market.

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High Dividend Yielding Stocks

15 Apr 2020 Nikita Bhoota

Investors in the stock market have different the risk appetite and financial goals. People with high risk-taking capacity invest in stocks that offer capital appreciation and involves more risk. On the contrary, investors with low risk appetite invest in high dividend yielding stocks which give stable income.  Moreover, when markets are facing a downturn, dividend stocks usually do not get into a free fall, and likely to outperform most of the time. 

Dividend yield is the annual return which the stock pays in the form of dividends. Dividend yield is calculated by dividing the dividend per share (DPS) by current market price (CMP).

The Indian equity markets Nifty 50 and Sensex are down 18.2% and 18.3% respectively from March 02, 2020- April 09, 2020. Fear of worldwide slowdown due to the aggressive spread of coronavirus (Covid 19) disease has affected investors’ confidence. Moreover, Post the Rs 1.7 lakh cr stimulus declared by the finance minister, expectations are high from the Reserve Bank of India to slash interest rates.

Therefore, high dividend yield stocks are worth investing in wake of falling interest rate scenario. Additionally, investing some of the corpus in high dividend-yield paying companies with strong fundamentals can cushion investors’ portfolios in case of an event of a fall but only to an extent.

Based on historical dividend yields following are some of high-dividend yielding stocks.

Company Name

Dividend Yield (%) FY19

3 years average Dividend Yield (%)

SJVN Ltd.

8.9

7.8

REC Ltd.

7.2

6.6

NLC India Ltd.

6.5

6.2

NHPC Ltd.

5.9

5.5

Indian Oil Corporation Ltd. (IOCL)

5.7

7.5

Hindustan Petroleum Corporation Ltd.

5.6

5.4

Coal India Ltd. (CIL)

5.5

6.0

Oil India Ltd.

5.5

5.6

Source: Ace Equity

The above- listed companies are some of the high dividend yielding companies on a consistent basis. 3 years average dividend yield for SJVN, REC, IOCL, Coal India and Oil India stood at 7.8%, 6.6%, 7.5%, 6% and 5.6% respectively. SJVN is a power generation company, operates hydro, wind and solar plants. CIL has leading position in coal mining and produces 80% of the country’s coal output. 

Most of these high dividend-paying companies have healthy cash reserves which could be utilized for paying dividends in difficult times as well when the core businesses get impacted.  Investing in high dividend yielding stock in a falling market sounds wise, but the investor should prefer investing in the companies that are fundamentally strong and have appreciated a little in the recent past months. There have been examples of loss of invested capital, hence the investor must ensure that he should not end up into value trap in the chase of high dividend. Thus, high dividend yielding stocks with strong fundamentals can be a safe investment bet in times of uncertainty in the market.