5
MIN
FACT CHECKED
Last edited by
Pranav Karnad
Pranav Karnadon
December 27, 2023
Reviewed by
.
Created on
August 5, 2022
You can no doubt carry out short-term trades in the stock market. But equity works best as a long-term investment option. Nevertheless, if you want to invest in the stock market but don’t want to wait for 10 or more years to reap the returns, I’ve got a little secret for you — Find stocks that pay dividends.
Dividend paying stocks give you a regular source of income year after year. So, even while you wait for your investment value to appreciate, you can earn some money along the way.
What is Dividend in the Stock Market?
When you buy the shares of a company from the equity market via the NSE or the BSE, you become its shareholder. And each financial year, when (and if) the company makes a profit, it may decide to pay out a part of those gains to its shareholders.
This payout is what we call a dividend.
So, to put it more technically, a dividend is a sum paid out by a company to its shareholders, typically from the profits or retained earnings of the company.
Stocks that pay dividends can make the payout in any of the following two ways —
- In the middle of of a financial year, in which case it is called the interim dividend
- At the end of a financial year, in which case it is called the final dividend
How to Invest in Dividend Paying Stocks in India?
To invest in dividend paying stocks in India, you need two things —
- A DEMAT account:
This account is necessary because it allows you to hold your shares in a dematerialised format.
- A trading account:
This account is necessary because it allows you to buy and sell shares via an exchange like the NSE or the BSE. Today, stock brokers who are also Depository Participants (DPs) offer two-in-one accounts that function as both demat and trading accounts. Once you’ve opened these accounts, you need to link your trading account with your bank account, and you’re good to go.
Highest Dividend Paying Stocks in India
If you want to make the most of stock dividends, you need to know which stocks to invest in. While there is no hard and fast rule about which stocks will or won’t pay dividends, some companies have historically had a better track record of dividend payouts.
One of the key metrics used to identify good dividend paying stocks is the dividend yield. This is simply the dividend expressed as a percentage of the share’s current market price.
Here is a compiled list of some of India's top dividend stocks, including large and small companies. Some of the high dividend-paying stocks in India are:
(This data is as on date: 13th September 2023)
Company Name | Market Cap (in ₹) | Current Price (in ₹) | Dividend Yield |
Vedanta | 86759.37 | 233 | 43.49% |
Hindustan Zinc | 132949.73 | 315 | 23.99% |
Coal India | 172340.70 | 280 | 8.67% |
ONGC | 231531.33 | 184 | 6.12% |
Power Grid Corporation | 179593.78 | 193 | 5.73% |
REC Ltd. | 64330.09 | 244 | 5.16% |
Power Fin. Corpn. | 73473.67 | 278 | 4.76% |
HCL Technologies | 346887.20 | 1,275 | 3.75% |
NHPC Ltd. | 52134.21 | 51.9 | 3.56% |
Hero Motocorp | 59793.31 | 2,994 | 3.34% |
Summing up
The bottom line is that stocks that pay dividends can give you two advantages — namely income as well as capital appreciation. So, if you want to increase the equity exposure in your portfolio and also earn some extra income in the process, dividend paying stocks check both these boxes perfectly.
Frequently Asked Questions (FAQs)
1. How to buy dividend stocks?
To buy stocks that pay dividends, you need a demat account and a trading account. You can register with a stock broker and then buy dividend paying stocks directly from the market.
2. How can I get dividend from stocks in India?
There are two ways to earn dividends from stocks in India. The first is by investing directly in individual stocks that pay dividends. Alternatively, you can invest in dividend yield mutual funds, which invest in stocks that pay dividends.
3. Is it good to buy dividend stocks in India?
Yes, dividend stocks may be the right fit for your portfolio if you are looking for an additional source of income. In addition to this, dividend stocks, like all stocks, also come with the potential of value appreciation over the long term.
4. Which Indian stock is the best to buy for dividends?
According to SAMCO, as of 2022, Bajaj Auto ranks as the best stock to invest in for dividends. There are multiple factors to dive into before you invest in dividend stocks and these are generally subject to market changes, it's best to do your research before you invest.
5. Which stock pays highest dividend?
As per the IDBI Capital report, NMDC has the highest dividend yield of 12.3% in 2022. Its latest dividend payout was 46.06%. Generally, the dividend payout refers to the amount of dividends paid to shareholders in regard to the net income a company generates for a fiscal year. The company's latest dividend per share would be ₹14.7 per equity share in FY22. Meanwhile, its 5-year average return on equity (RoE) is 19.73%.
6. Which Indian shares pay monthly dividends?
There are multiple dividend stocks that pay monthly dividends, while stocks like REC and Banco products have ranked high this year, some quick searches will help you find out the current highest monthly dividend paying stocks.
Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
