10 Best Dividend Stocks in India (Updated: May 2019)–
“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” – John D Rockefeller
Whenever a retail investor, like you and me, buys a stock, then their main aim is to earn money through their investment. There are two methods by which anyone can earn money by investing in stocks. They are:
- Capital Appreciation
The first one, capital appreciation, is quite famous among investors. Everyone knows this secret to earn in the stock market. Buy low and sell high. The difference is capital appreciation or profit.
Suppose you bought a stock at Rs 100 and two years hence, the price of the stock has increased to Rs 240. Here, the capital appreciation is Rs 240- Rs 100 = Rs 140. In short, you made a profit of Rs 140 or 140%.
Almost everyone who enters the market knows this method of earning by stocks. It can also be concluded that most people enter the market hoping that their investment will be doubled or quadrupled and will make them a millionaire one day through capital appreciation.
Now, let us move to the second method of earning through stocks- DIVIDENDS.
Whenever a company is for profit, it can use this profit amount in different ways. First, it can use the profit amount in its expansion like acquiring a new property, starting a new venture/project, etc. Second, it can distribute the profit among its owners and shareholders. Third and final, it can distribute some portion of the profit to the shareholders and use the remaining in carrying out its expansion work.
This amount distributed among the shareholders is called DIVIDEND.
What is a dividend?
“A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.”
Typically, most companies give dividends two times a year, namely– Interim dividend and final dividend. However, this is not a hard and fast rule. Few companies, like MRF, gives dividends three times a year.
Why are dividends good?
Suppose you are a long-term investor. You have invested in the stocks of a company for 15-20 years. Now, if the company does not give any dividends, there is no way for you to make money until you sell the stocks.
On the other hand, if the company gives a regular dividend, say 4% a year, then you can plan your expenses accordingly.
A regular dividend is a sign of a healthy company.
A company, which has given a consistent (moreover growing) dividend for an interval of over 10 consecutive years, can be considered a financially strong company. On the contrary, the companies that give irregular dividends (or skips dividends in harsh economic conditions) can not be considered as a financially sound company.
If you want to learn stocks from scratch, I will highly recommend you to read this book: ONE UP ON THE WALL STREET by Peter Lynch- best selling book for stock market beginners.
Big dividend yield can be an incredibly attractive feature of stock for the people planning for retirement.
Now that we have understood the meaning of dividends, let us learn a few of the important financial terms that are frequently used while talking about dividends.
Must know financial terms regarding Dividends
1. Dividend yield: It is the portion of the company earnings decided by the company to distribute to the shareholders. A stock’s dividend yield is calculated as the company’s annual cash dividend per share divided by the current price of the stock and is expressed in annual percentage. It can be distributed quarterly or annually basis and they can issue in the form of cash or stocks.
Dividend Yield = (Dividend per Share) / (Price per Share)*100
For Example, If the share price of a company is Rs 100 and it is giving a dividend of Rs 10, then the dividend yield will be 10%. It totally depends on the investor whether he wants to invest in a high or low dividend yielding company.
2. Dividend %: This is the ratio of the dividend given by the company to the face value of the share.
3. Payout ratio: It is the proportion of earnings paid out as dividends to shareholders, typically expressed as a percentage. The Payout Ratio is calculated as follows:
Payout Ratio = Dividends per Share (DPS) / Earnings per Share (EPS)
As a thumb rule, avoid investing in companies with very high dividend payout ratio. In other words, be cautionary if the payout ratio is greater than 70%. (Also read: The Fundamentals of Stock Market- Must Know Terms)
To move further now that we have understood the basics behind the dividends, here is the list of 10 Best Dividend Stocks in India.
10 Best Dividend Stocks in India-
In addition, if you are interested to know about other high dividend stocks, then you can find it here: BSE TOP DIVIDEND STOCKS
The growing companies give less dividend yield to their shareholders as they use the profit amount in their expansion.
On the other hand, the Blue Chip stocks, which are large and established company and has already reached a saturation point, gives good regular dividends. Further, the public sector companies are known for giving good dividends. Industries like Oil and petroleum companies, in general, give decent dividends.
Here are few of such stocks with high current dividend yields which are also worth investing:
Also Read: PSUs with high dividend yields
Where to find dividend on a stock?
You can find the dividend of stocks on any of the major financial websites in India. Here are few:
- Money Control: http://www.moneycontrol.com/
- Economic times- Market: http://economictimes.indiatimes.com/markets
- Screener: https://www.screener.in/
- Investing.com: https://in.investing.com/
- Market Mojo: https://www.marketsmojo.com/markets
That’s all. I hope this post about ‘10 Best Dividend Stocks in India That Will Make Your Portfolio Rich’ is useful to the readers. Further, I will highly recommend not investing in stocks based on just high dividend yield.
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If you have any queries or suggestions, feel free to comment below. I will be happy to receive your feedback. #HappyInvesting.
Hi, I am Kritesh, an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting