While looking for the right stock to invest in, investors look at a number of factors. While some prefer value stocks, some prefer growth stocks and some choose dividend stocks. Investors choose dividend stocks since it provides investors with a regular steady income. Such stocks are also very consistent and tend to give stable returns to investors over the long run.
A number of times dividend is viewed as a sign of strong growth for the firm as well as its potential for future earnings making the stock more alluring for investors.
Dividend stocks are generally well-established firms with a good track record of distributing some part of their earnings back to shareholders. Many companies have been paying dividends to their shareholders for decades. A dividend is reward companies pay to their shareholders for investing in their equity. It is an amount paid at regular intervals to shareholders out of the company's profit.
The board of directors of the company decide upon an amount, they would like to pay the shareholders from its profits. However, it is not mandatory for every firm to pay a dividend. Many firms may decide to reinvest their profits in the business instead of paying dividends.
Investors who are looking for regular payments should always prefer investing in dividend stocks. It generates two sources of potential income, the dividends and the capital appreciation of the stock.
Let's now look at some best dividend-paying companies, you can invest in:
ITC, earlier known as Imperial Tobacco Company has been one of the best dividend-paying stocks in the last decade. It has a dividend yield of over 5 percent and has maintained a dividend payout ratio of 50 percent in the last decade. It has a very good track record of paying consistent dividends despite not performing very well in the last year. For the year ending March 2021, ITC has declared an equity dividend of ₹10.75 per share.
The Vedanta Group firm is also one of the best dividend-paying firms you can invest in. It has a dividend yield of over 6 percent and has declared dividends 35 times since 2001. Hindustan Zinc has declared a dividend of ₹21.30 per share in FY21 with a dividend payout ratio of 113 percent. The firm reported an 85 percent jump in its Q4FY21 net profit at ₹2,481 crore mainly due to a rise in metal prices and lower cost of production.
Bajaj Auto is the world’s fourth-largest two and three-wheeler manufacturer. The company is a high dividend-paying stock with a yield of 3.3 percent and a payout ratio of 83.4 percent. The firm's revenue has risen at a CAGR of 4.21 percent over the last 5 years and profit after tax has grown at a CAGR of 3.62 percent in this time. In FY21, the firm declared an equity dividend amounting to ₹140.00 per share. It has declared 15 dividends since June 2008.
The oil major declared a total dividend of ₹12 per share in FY21 and has a yield of around 10.4 percent for the year. It has a dividend payout ratio of 50.5 percent in FY21 and declared a total dividend of ₹11,017 crore for the year. For Q4 FY21, India's biggest oil firm reported an increased 78.6 percent QoQ to ₹8,781 crore helped by higher refining margins.
Satluj Jal Vidyut Nigam or SJVN is a public sector undertaking engaged in hydroelectric power generation. For the year ending 2021, SJVN has a dividend payout ratio of 52.2 percent and a dividend yield of 7.42 percent. The firm has a good dividend track report and has consistently declared dividends for the last 5 years.