Finschool By 5paisa

Finschool

5 High-Dividend Yielding Stocks

5 High-Dividend Yielding Stocks

5 High-Dividend Yielding Stocks

Investors in the stock market have different risk profiles and financial ambitions. People with high risk profile invest in stocks that offer capital appreciation, while investors with low risk appetite invest in stocks that offer regular and consistent dividends. In the current volatile markets when Sensex is at expensive valuations i.e. ~20x FY19E earnings, investing in higher dividend stocks offer greater margin of safety. Companies with matured business cycles (no major capex in the near term) are the ones which pay high dividends on regular basis.

In the Union Budget 2018-19, Finance Minister Arun Jaitley had proposed 10% tax on dividend distributed by equity oriented mutual funds. As per the proposal, mutual fund schemes will deduct the 10% dividend distribution tax and distribute the rest to investors. This will be implemented from April 1, 2018 onwards, Hence, some companies may go in for buyback in place of dividends to avoid this tax treatment.

Below discussed are some fundamentally strong companies that have high dividend yield


Stock

CMP* (Rs)

Dividend Yield (%) TTM

3-yr avg. Dividend Yield (%)

SJVN Ltd.

35.55

7.4

5.4

Coal India Ltd.

310.25

6.6

7.3

NHPC

27.35

6.4

5.0

Hindustan Zinc Ltd.

315.65

9.4

9.3

Castrol

190.25

3.6

2.1

SJVN Ltd

SJVN, a power generation company, operates hydro, wind and solar plants. The total power generation capacity was at 1,964.6MW (FY17). SJVN will develop 1,000 MW of solar power generation capacity over the next 5-7 years. It has average dividend yield of 5.4% over the past three years. Additionally, SJVN has recently announced a buyback offer of 20.68cr shares at a price of Rs38.75 per share. The size of the buyback is ~Rs801cr. The stock is currently trading at a valuation of ~1.1x FY20E P/BV.

 

Coal India Ltd (CIL)

CIL has leading position in coal mining and produces 84% of the country’s coal output. Its production stood at 543mn tonnes in FY17 vs. target of 599mn tonnes. CIL is planning to expand production to 908mn tonnes by FY20. The average dividend yield of the company was 7.3% for the last 3 years. It had a cash of Rs34,584cr (including current investments) as on September 30, 2017. The stock is currently trading at ~6.8x FY20E EV/EBITDA.

 

NHPC

NHPC is a hydropower generation company with power generation capacity of 5,171MW in FY17. In FY17, NHPC had generated 23,275mn units of electricity against targeted 23,000mn units. According to the company’s dividend policy, dividend payout would be 5% of the net worth, which would amount to 60-80% of the annual net profit. The average dividend yield for the past 3 years for NHPC stood at 5%. The standalone cash position of the company was at Rs2,558cr as on September 30, 2017. The stock is currently trading at 0.9x FY20E P/BV.

 

Hindustan Zinc Ltd (HZL)

HZL, a mining company, produces and refines zinc, lead and silver. It is the second largest producer of zinc globally and also claims of having one of the lowest production costs in the world. HZL aspires to move to underground mining by FY20 with a mining capacity of 17.5mn tonnes per annum. In 2014, HZL had come up with a 6-year expansion plan that required capex of $1.6bn.  The cash and cash equivalents of HZL stood at Rs19,176cr (Q3FY18). It has historical dividend yield of 9.3% over the last three years. The stock is currently trading at ~11.2x FY20E EPS.

 

Castrol India

Castrol India is the leading automotive and industrial lubricant manufacturer in India. It is a debt-free company with cash position of Rs784.2cr as on December 31, 2017. Castrol has maintained average earnings payout ratio of 77% over the last three years. Considering the leadership and strong brand recognition of the company in the lubricants market, we expect Castrol to maintain high dividend yield backed by robust earnings. The average dividend yield for the past three years was 2.1%. The stock is currently trading at a price-to-earnings ratio of ~23x FY20E EPS.



Related Articles

How To Invest In Stocks?

How To Invest In Stocks?



Read More
5 Penny Stocks Which Are Not Penny

5 Penny Stocks Which Are Not Penny



Read More
Investing in Shares

Important Points You Should See Before Investing In Shares



Read More
Here’s All You Need to Know About Getting a Demat Account

Here’s All You Need to Know About Getting a Demat Account



Read More
Guide To Become A Successful Investor

Guide To Become A Successful Investor



Read More
6 Tips To Start Investing In Stock Market

6 Tips To Start Investing In Stock Market



Read More
How to select a good broker

How To Select A Good Broker?



Read More
Difference between Trading, Investing and Speculating

Difference between Trading, Investing and Speculating



Read More

Why Should One Invest?



Read More
Beginners Guide to Investments in Stocks

Beginners Guide to Investments in Stocks



Read More
selecting a stock broker

5 Factors To Look At While Selecting A Stock Broker



Read More
who can invest in stock market

Who Can Invest In Stocks?



Read More
How to Buy Stocks Online: A Step-By-Step Guide?

How to Buy Stocks Online: A Step-By-Step Guide?



Read More
Factors That affect Investors

Factors Which Affect Investors Investment Decision?



Read More
What are BSE Top Gainers and BSE Top Losers?

What are BSE Top Gainers and BSE Top Losers?



Read More
The ABC’s Of Investing

The ABC’s Of Investing



Read More
Everything one needs to know about demat accounts

Everything One Needs To Know About Demat Accounts?



Read More
What are NSE Top Gainers and NSE Top Losers?

What are NSE Top Gainers and NSE Top Losers?



Read More