There are several benefits to investing in top dividend-paying stocks, mainly when an investor plans to invest in such stocks for the long-term. Apart from offering consistent income, there are some top dividend-paying stocks which are in defensive sectors. Therefore, these companies can handle the economic downturns with lesser volatility as they are more stable and sustainable. Dividend-paying companies tend to have substantial amounts of cash. Therefore, they are usually strong companies having good prospects for performance over long term. Dividend is referred to a regular payment which is distributed from the company’s earnings and these are paid to a class of its shareholders. Even though cash dividends are considered as the most common ones, dividends can be in the form of shares of stock or other property. That being said, not all the stocks that trade on exchanges pay dividends.
Top dividend-paying stocks enable investors to profit in 2 ways. First, the investors can see capital appreciation in the stock price, and secondly, with the help of distributions made by the organisations. There are companies which tend to pay dividends every quarter. More often than not, investors who are nearing retirement or who have already retired are focused on dividend stocks as source of income. What’s better than the company who is the leader in the industry and pays regular dividends? This way you get capital appreciation regular cash flows. Thus, let us quickly have a look at top dividend-paying stocks which you should consider in 2023.
1. Hindustan Zinc Ltd
The company has been categorised as India’s largest and world’s second largest integrated zinc producer. It is a subsidiary of Vedanta Limited which owns 64.9% stake, while Government of India owns ~29.5% stake. It is listed on both NSE and BSE.
The company has released results for 1Q ended June 30, 2023, with its PAT coming at INR1,964 crores which was impacted by lower metal prices. The company believes that in a cyclical commodity business, protecting margins remains fundamental. Therefore, its strong focus lies on optimisation of cost and enhancing volumes. Cornerstone of the company’s strategic priorities is to maximise shareholders returns. Strategic development projects continue to progress well and are on track, while it continues to progress on its sustainability journey towards net-zero by 2050.
Domestic zinc demand is expected to remain resilient because of fiscal thrust on construction & infrastructure projects. The domestic lead demand is strong, stemming from automotive, industrial battery segment, infrastructure development and govt. industrial initiatives such as ‘Make in India’ to accelerate industrial battery consumption.
In FY23, the company delivered a strong dividend yield with record pay-out of around INR32,000 crore. It declared total dividend of INR75.50 in FY23. At the time of writing, its trailing annual dividend yield came in at ~19.13%.
2. ITC Limited
ITC is one of India’s foremost private sector companies which has its presence across FMCG, Hotels, Packaging, Paperboards & Specialty Papers, Agri & IT Businesses.
The company has released standalone financial results for the quarter ended 30th June, 2023. Gross revenue (ex-Agri Business) of the company went up by 10.6% year-over-year, with PBT coming at INR6,546 crores, up 18.2% year-over-year. The company stated that Indian economy remained resilient and was supported by buoyant tax collections, moderating inflation, credit growth uptick, etc.
The company’s FMCG businesses saw strong growth in both urban and rural markets which was supported by superior consumer insights, strong innovation, portfolio premiumisation, wider distribution footprint, and a range of digital initiatives. Its cigarettes business countered illicit trade and reinforced market standing by augmenting its product portfolio with the help of innovation, democratising premiumisation throughout segments and improving product availability due to superior on-ground execution.
At the time of writing, the company’s annual dividend yield came in at ~2.86% and its 5-year average dividend yield was ~3.80%. It has the pay-out ratio of ~79.69%.
3. Tech Mahindra Limited
The company provides innovative and customer-centric digital experiences, allowing enterprises, associates, and society to rise for the more equal world, and value creation. The company focuses on leveraging next-gen technologies such as 5G, Metaverse, Blockchain, Quantum Computing, Cybersecurity, AI, etc.
In FY23, the company saw 10% growth in operating revenues even though there was sluggishness in macro-economy and closed the year with revenue of INR533 billion (US$6.6 billion). Its ability to integrate acquisitions deeper into digital fabric and its proven transformation capabilities supported the company’s results in FY23.
In FY23, the company paid ~91% of net income as dividends, which translates to the per share dividend of INR50 for FY23. On 13th May 2022, the company’s Board of Directors proposed a special dividend of INR15 per share and final dividend of INR15 per share for the year ended March 31, 2022. At the AGM held on July 26, 2022, it approved dividend of INR29,183 million which was paid in the month of August 2022. On April 27, 2023, the company proposed a final dividend of INR32 per share for the year ended March 31, 2023.
4. ONGC Limited
The company is the largest crude oil and natural gas organisation in India, which contributes ~71% to Indian domestic production.
In FY23, the company saw net profit of INR38,829 crore and posted highest-ever total dividend of 225%. Gross revenue of the company came in at INR36,293 crores in 4Q23, exhibiting a rise of 5.2% year-over-year and INR1,55,517 crores in FY23, up by 40.9% year-over-year. It saw total dividend of INR11.25 per share, which consisted interim dividend of INR10.75 per share and final dividend of INR0.50 per share.
At the time of writing, the company’s annual dividend yield came in at 6.21%.
Conclusion
For investors are just starting their investment journey, it is advisable to invest in the top dividend-paying stocks as these stocks are less volatile due to their resilient business model and market presence. However, investors are required to exercise caution as a high dividend yield may not always be a good sign. This means that the company is returning so much of its profits to investors (rather than investing in the business to grow). Therefore, expert opinion is recommended for first-time investors.
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