5 High-Dividend yielding stocks that you should know

Nikita Bhoota

22 Aug 2017

Generally, investors in India avoid taking risk while investing. They look for investment instruments which offer consistent returns and are less volatile. However, one may prefer investing in high dividend yielding stocks which give stable income vs. high value/expensive stocks that involve more risk. Before discussing high-dividend yielding stocks, let us understand what exactly is the dividend yield?

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 by current market price. High dividend yield could be a result of either fall in the stock price or payment of higher dividend. Therefore, one should also consider the fundamentals of the company while selecting high dividend yielding stocks.

Below-mentioned are some of the high-dividend yielding stocks.

Stock

Dividend Yield (%) 2017

3 Years Average Dividend Yield (%)

Coal India Ltd.

8.1

9.2

Hindustan Petroleum Corporation Ltd.

6.1

6.0

Oil India Ltd.

5.4

6.3

Oil & Natural Gas Corporation Ltd.

4.8

5.4

Indiabulls Housing Finance Ltd.

3.4

3.3

Source: Ace Equity

Coal India (CIL)

CIL is the largest coal producer in the world and controls 80% of the Indian coal market. Its product portfolio largely consists of thermal coal - 97% while the rest is cooking coal. The company is debt free and has net cash of ~ Rs 29,000 cr (FY17) in its books. The company has a mature business and may not require major capex going forward, which will help it maintain healthy cash flows. The average dividend yield for the past 3 years is 9.2%, while it was 8.1% in FY17.

Hindustan Petroleum Corporation Ltd (HPCL)

HPCL is a leading oil and gas refining and marketing company in India with a market share of 21.44% as on FY17. It operates two major refineries producing petroleum fuels with a capacity of 7.5 MMTPA (Mumbai) and 8.3 MMTPA (Visakhapatnam). The company has consistently maintained its average dividend payout ratio in the range of 30% in the past 5 years and is expected to improve further on account of government push on PSU’s to double their dividend payout ratio. Government holds 51% stake in HPCL. The company’s average dividend yield stood at 6% for the past 3 years.

Oil India Ltd

Oil India is the second largest oil and gas exploration and production companies in India. The company has healthy debt to equity ratio of 0.5x (FY17) and average dividend payout ratio of 47% in the past 5 years. However, the company has shown poor financial performance historically. Therefore, in order to maintain its ROE and reward the shareholders, we expect the company to maintain its dividend yield in the future. The average dividend yield for the past 3 years stood at 6.3%.

Indiabulls Housing Finance Ltd (IHFL)

IHFL has transformed from a diversified lender to a focused mortgage player. Its outstanding loans stood at ~Rs 81,422 cr as of FY17. Loan book mix was ~79% mortgage loans and ~21% corporate financing. GNPA & NNPA presently stands healthy at ~0.85% and ~0.36% respectively. IHFL’s PAT has tripled to Rs 2,900 cr in FY17 in the past five years. We believe that strong profitability growth and adequate capital will help the company to maintain its average dividend payout ratio of ~65% in the past 3 years. The average dividend yield for the past 3 years was 3.3%.

Oil & Natural Gas Corporation Ltd (ONGC)

ONGC is the largest oil and gas exploration and production company in India. It accounts for ~70% of India’s oil and gas production. ONGC has maintained dividend payout ratio of more than ~40% in the past 5 years and has reached to 51% in the FY17. We expect the company to maintain a higher dividend payout ratio given its strong growth prospects with the commencement of new fields and efforts for redevelopment in existing fields. The average dividend yield for the past 3 years was 5.4%.

Have Referral Code?

Similar articles

  • Responses
  • Patidar Samaj

    - 2 hrs ago

    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

Load More
mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


Banner

5 High-Dividend yielding stocks that you should know

Nikita Bhoota

22 Aug 2017

Generally, investors in India avoid taking risk while investing. They look for investment instruments which offer consistent returns and are less volatile. However, one may prefer investing in high dividend yielding stocks which give stable income vs. high value/expensive stocks that involve more risk. Before discussing high-dividend yielding stocks, let us understand what exactly is the dividend yield?

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 by current market price. High dividend yield could be a result of either fall in the stock price or payment of higher dividend. Therefore, one should also consider the fundamentals of the company while selecting high dividend yielding stocks.

Below-mentioned are some of the high-dividend yielding stocks.

Stock

Dividend Yield (%) 2017

3 Years Average Dividend Yield (%)

Coal India Ltd.

8.1

9.2

Hindustan Petroleum Corporation Ltd.

6.1

6.0

Oil India Ltd.

5.4

6.3

Oil & Natural Gas Corporation Ltd.

4.8

5.4

Indiabulls Housing Finance Ltd.

3.4

3.3

Source: Ace Equity

Coal India (CIL)

CIL is the largest coal producer in the world and controls 80% of the Indian coal market. Its product portfolio largely consists of thermal coal - 97% while the rest is cooking coal. The company is debt free and has net cash of ~ Rs 29,000 cr (FY17) in its books. The company has a mature business and may not require major capex going forward, which will help it maintain healthy cash flows. The average dividend yield for the past 3 years is 9.2%, while it was 8.1% in FY17.

Hindustan Petroleum Corporation Ltd (HPCL)

HPCL is a leading oil and gas refining and marketing company in India with a market share of 21.44% as on FY17. It operates two major refineries producing petroleum fuels with a capacity of 7.5 MMTPA (Mumbai) and 8.3 MMTPA (Visakhapatnam). The company has consistently maintained its average dividend payout ratio in the range of 30% in the past 5 years and is expected to improve further on account of government push on PSU’s to double their dividend payout ratio. Government holds 51% stake in HPCL. The company’s average dividend yield stood at 6% for the past 3 years.

Oil India Ltd

Oil India is the second largest oil and gas exploration and production companies in India. The company has healthy debt to equity ratio of 0.5x (FY17) and average dividend payout ratio of 47% in the past 5 years. However, the company has shown poor financial performance historically. Therefore, in order to maintain its ROE and reward the shareholders, we expect the company to maintain its dividend yield in the future. The average dividend yield for the past 3 years stood at 6.3%.

Indiabulls Housing Finance Ltd (IHFL)

IHFL has transformed from a diversified lender to a focused mortgage player. Its outstanding loans stood at ~Rs 81,422 cr as of FY17. Loan book mix was ~79% mortgage loans and ~21% corporate financing. GNPA & NNPA presently stands healthy at ~0.85% and ~0.36% respectively. IHFL’s PAT has tripled to Rs 2,900 cr in FY17 in the past five years. We believe that strong profitability growth and adequate capital will help the company to maintain its average dividend payout ratio of ~65% in the past 3 years. The average dividend yield for the past 3 years was 3.3%.

Oil & Natural Gas Corporation Ltd (ONGC)

ONGC is the largest oil and gas exploration and production company in India. It accounts for ~70% of India’s oil and gas production. ONGC has maintained dividend payout ratio of more than ~40% in the past 5 years and has reached to 51% in the FY17. We expect the company to maintain a higher dividend payout ratio given its strong growth prospects with the commencement of new fields and efforts for redevelopment in existing fields. The average dividend yield for the past 3 years was 5.4%.

Have Referral Code?