Best Dividend Paying Stocks in India

What is mean by dividend?

Dividend is a portion of profit/reserve paid to the shareholders of the company as a reward. Dividend is generally paid out of profits however companies can even pay dividend out of its reserves when the incur loss. Payment of dividend is optional and decided at the AGM of any company.

What is dividend yield?

Dividend yield simply means the ratio between dividend and the current market price of the stock.

Dividend Yield = Annual Dividend Per Share/Current Share Price x 100

Let’s understand it with an example, suppose X invests in a stock which is trading at Rs. 100 per share, and the annual dividend paid is Rs 10 per share. Then the dividend yield for this particular stock will be 10% [Rs 10/Rs 100 X 100].

Higher the dividend yield, better the investment. The catch is to invest in the stocks when they correct i.e. the price is less which in turns give the better dividend yield.

However in order to buy dividend paying stocks, you need to keep an eye on two dates.

Record date and Ex-date.

Record date –

It is the cut-off date set by the company to be eligible for dividend. All the shareholders who own the shares in their Demat Account on the record date will be entitled to receive Dividends.

Ex-Date –

If you want to be eligible for the dividends, you have to buy the shares at least one day before the ex-dividend date.

In short, the idea is that you should buy the shares before Ex-Date and make sure that the shares are present in your demat Account on the Record Date.

Top 10 companies having good dividend yield –

Following are the 10 companies extracted from https://www.screener.in/ (19/05/2021)

The formula used to to extract these companies is as follows –

Dividend yield > 2% AND

Dividend Payout < 100% AND

( Profit growth 3Years > 10% OR
Profit growth 5Years > 10% OR
Profit growth 7Years > 10 )% AND

Average 5 years dividend > 0 AND
Dividend last year > Average 5 years dividend AND
Profit after tax > Net Profit last year * .8 AND
Dividend last year > .35