Do You Own High Dividend Paying Stocks?

Investors in the stock market have different risk appetite and financial goals. Individuals with high risk-taking capacity invest in stocks that offer capital appreciation and involves more risk. On the contrary, investors with low risk appetite invest in high dividend yielding stocks which give stable income.  Moreover, when markets are facing a downturn, dividend stocks usually do not get into a free fall, and likely to outperform most of the time.

Dividend yield is the annual return which the stock pays in the form of dividends. Dividend yield is calculated by dividing the dividend per share (DPS) by current market price (CMP).

Investing some of the corpus in high dividend-yield paying companies with strong fundamentals can cushion investors’ portfolios in case of downfall in the market but only to an extent.

Based on historical dividend yields following are some of high-dividend yielding stocks.
 

Source: Ace Equity

The above- listed companies are some of the high dividend yielding companies on a consistent basis. 3 years’ average dividend yield for SJVN, REC, IOCL, Coal India and Oil India stood at 8.6%, 9.0%, 7.6%, 6.6% and 8.4% respectively. SJVN is a power generation company, operates hydro, wind and solar plants. CIL has leading position in coal mining and produces 80% of the country’s coal output. PGCIL owns and operates one of the largest transmission networks, spanning over 125,000 circuit kms, second only to the Grid Corporation of China. IOCL is the largest public sector, oil refining and marketing company in India.

Most of these high dividend-paying companies have healthy cash reserves which could be utilized for paying dividends in difficult times as well when the core businesses get negatively impacted.  Investing in high dividend yielding stocks sounds wise, but the investor should prefer investing in the companies that are fundamentally strong. There have been examples of loss of invested capital, hence the investor must ensure that he should not end up into value trap in the chase of high dividend. Thus, high dividend yielding stocks with strong fundamentals can be a safe investment bet in times of uncertainty in the market. 

Disclaimer: The above report is compiled from information available on public platforms. These are not buy or sell recommendations.