How wonderful it feels when you make money passively, by not putting much effort into earning such money. It is not your regular salary, it is simply dividends from the company that you have invested in since a year ago. Value investors like Rakesh Jhunjhunwala make a surprising ₹122.63 crores as dividend income in FY22.
What are dividends?
A dividend is a reward given by the company to its shareholders for having patience with their ups and downs and staying invested in the company constantly. It is not mandatory for the companies to give dividends as shareholders are seen as proportionate owners of the company, unlike debt instruments.
What are PSUs?
Public sector undertakings are the companies that are majorly owned by the government, whether it is the state, local, or central government, or proportionately by all of them. Any subsidiary of PSU will also be considered as PSU for the same purpose. Where majorly owned means equal to or more than 51% of the share in the company owned by the government.
Why do PSUs give high dividends?
Public sector units pay steady and continuous dividends to their shareholders as these companies have broader sources of income because they are interrelated with the core business of the economy. The core businesses include electricity generation and distribution, network infrastructure, and procurement of natural resources.
These are 5 high dividend paying public sector undertakings (PSU) that will help you in earning regular (almost) passive income through dividends.
Indian Oil Corporation
Indian Oil Corporation is engaged in the activities of petroleum products, petrochemicals, and oil and gas exploration, which is also a Maharatna company. The company is also engaged in activities related to explosives and cryogenic business, windmills, and solar power generation and owns 9 refineries in the country. The primary business of the company is to establish a network of fuel stations across the country. The dividend yield of the company is 8.50%
The company is engaged in the business of infrastructure finance operating under the ministry of power. The core business of the company is to provide financial assistance to the power sector at the central and state government levels. The dividend yield of the company is 9.18%
Power financial corporation limited
The company is registered with the RBI as an infrastructure finance company with the status of Maharatna. The core business is to give financial assistance to the Indian power sector as fund and non-fund-based projects. The dividend yield of the company is 9.61%
The company has the status of Navratna company with 100% of the government, dealing with mining iron ore, containing 7 iron ore and 2 coal blocks within the country. The dividend yield of the company is 4.55%
The company is engaged in mining, producing, and operating coal washeries in the country. This company does not have a monopoly in the economy as the government has allowed 100% FDI in the sector via an automatic route. The dividend yield of the company is 9.17%
Investing in a high dividend yield company with strong fundamentals would help you in steadily maintaining cash inflow without ignoring the growth aspects of the financial planning. Indian PSUs have shown a decent return and growth in the economy in a year.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com