10 best dividend stocks that you can think of investing as a passive income. Investing in dividend stocks is always fascinating to people, particularly working groups and retired people. The dividend that you earn on the stocks is an additional source of income. To that end, the best way to enhance your income from the dividend is to invest in the highest dividend-paying stocks. Dividend-paying stocks provide a regular and steady income stream.
Regular dividend pay indicates companies with financial stability. Companies that pay regular dividends are strong in their cash flow with a stable business. Mostly these companies do not reinvest their cash flow for business growth. However, the most important part of this job is to find the right stocks that pay dividends and pay for the long term.
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How do you choose the best dividend paying stocks
Mainly companies that have stable payout ratios and relatively high dividend yields are the most attractive stocks for dividend income.
Dividend yield can also be a good indicator to choose or scrutinized stocks. But many times, companies pay dividends even while they are incurring a short-term loss. Hence, the dividend payout ratio is a better indicator of a company’s ability to distribute dividends consistently over a long time.
The dividend payout ratio is the dividends paid to shareholders out of the net income the company generates. This is the percentage of net income that is distributed to shareholders in the form of dividends. If the payout ratio is too high near 100, the company is not reinvesting its profits for future operations. However, a new, growth-oriented company would not pay high dividends as the company will reinvest to expand, develop new products, and move into new markets for its growth.
Hence, it is always better to look for the dividend payout ratios over a period. If this is consistent over the period and is increasing, then it is better to invest in those stocks for a stable and upward dividend on your investment. Again, look for mature companies for better dividends.
Highest dividend-paying stocks
While selecting the highest dividend-paying stocks in India, we considered the dividend payout ratio and dividend Yield along with the other financial parameters. We have considered stocks with a minimum dividend payout ratio of over 50% while a Dividend yield of over 2%. However, preferably choose the stocks with above 3% of dividend yield for better dividend income.
The dividend yield is a financial ratio relative to the company’s stock price. The higher dividend yields do not always indicate attractive investment opportunities. The dividend yield of a stock may be elevated as a result of a declining stock price.
Hence, we have used both parameters to select the 10 best dividend stocks in India to invest in. While finalizing these stocks we also consider other financial parameters such as ROCE, PE ratio, ROE, Qtr Sales Var %, etc. The dividend policy of the company also plays a significant role while selecting the best dividend paying stocks.
10 best dividend stocks
| Best Dividend Paying Stocks | Market Cap In Crore | Div Yield % | Qtr Sales Var % | ROCE % | Payout ratio % | PE Ratio % |
| Banco Products | 1490.06 | 9.57 | 14.4 | 23.54 | 93.82 | 10.41 |
| Oracle Fin.Serv. | 27025.42 | 6.09 | 7.42 | 36.03 | 86.75 | 14.99 |
| Swaraj Engines | 1967.86 | 4.95 | 11.98 | 49.68 | 88.72 | 16.75 |
| HCL Technologies | 300348.46 | 3.42 | 19.52 | 25.4 | 84.47 | 21.79 |
| Hawkins Cookers | 3343.91 | 2.37 | 11.7 | 50.43 | 94.59 | 35.42 |
| Mphasis | 39017.02 | 2.24 | 22.67 | 27.38 | 60.38 | 24.87 |
| Petronet LNG | 32527.5 | 2.09 | 47.84 | 29.8 | 51.46 | 9.8 |
| VST Industries | 5403.55 | 3.99 | 26.65 | 42.44 | 67.5 | 15.45 |
| Coal India | 142636.3 | 7.38 | 28.11 | 54.29 | 60.36 | 5.41 |
| NHPC Ltd | 42992.79 | 4.17 | 14.47 | 6.5 | 51.6 | 11.11 |
However, if you select the best dividend paying stocks out of the above list of table, I would suggest to go for the dividend yield of above 3% with higher payout ratio of more than 60. Also, look for the PE ratio to gain the price appreciation of the stocks to gain from both dividend and stock price movement.
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We endeavor to help you to understand different aspects of a company before you invest in the company’s IPO. Here are some suggested readings on company insights BIBA Fashion Limited IPO, Mankind Pharma IPO, Sebi registered stock brokers, Investing in stocks for dividend.