High Dividend Paying Penny Stocks In India

Finding stocks that both cost a small investment and give you regular cash payments sounds like a dream come true. Penny stocks with dividends offer this exact combination for investors looking to grow their money. 

These stocks cost less but still share profits with investors through dividend payments. For people starting with small savings, these penny stocks provide a way to enter the stock market without spending too much money upfront. They also give you the benefit of getting regular income while you wait for the stock price to grow over time. 

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

In India, several penny stocks stand out for their consistent dividend payouts and growth potential. Here are the top 10 highest stocks ranked by dividend yield percentage for 2025:

Powergrid Infrastructure Investment Trust

Powergrid Infrastructure Investment Trust (InvIT) owns and operates power transmission projects across multiple Indian states. Sponsored by PGCIL and SEBI-registered, it manages critical transmission infrastructure, including high-voltage transmission lines and substations that form the backbone of India's power grid system.

Investors can consider this InvIT for its attractive dividend yield, low debt levels and stable transmission assets. The trust offers exposure to India's essential power infrastructure with consistent revenue streams from regulated transmission tariffs, providing steady cash flows in the growing energy sector.

Jagran Prakashan Ltd

Jagran Prakashan Limited is a publishing company that started in 1975. Founded by freedom fighter Puran Chandra Gupta, it prints newspapers like Dainik Jagran, India's most-read daily newspaper.

Jagran's market-leading Hindi newspapers reach millions of people daily, boasting strong brand recognition. The company offers consistent dividends for income investors and diversifies into radio, events and digital platforms. However, investors should note the modest revenue growth and return on equity (ROE) when considering this established media player.

Vardhman Acrylics Ltd

Vardhman Acrylics Limited started making special fibres in 1999. Using Japanese technology, the company built a modern factory in Gujarat, India. They make acrylic fibre and tow under the brand name VARLAN. 

The company presents a solid investment opportunity because acrylic fibres are in steady demand from clothing and home textile makers. Its modern factory with Japanese technology gives it quality advantages over older competitors. The company supplies materials for everyday items like sweaters and carpets, which people always need. 

Paramatrix Technologies Ltd.

Paramatrix has been creating software solutions for businesses since 2004. Based in Mumbai, they have offices across Asia, including India, Hong Kong, Singapore and Japan, and have completed over 350 projects for more than 150 clients in banking, manufacturing and other industries. 
Paramatrix benefits from growing software demand and stays debt-free with regular dividends. However, declining returns despite low spending may signal business challenges. Investors should consider their risk tolerance before investing.

Gothi Plascon Ltd

Gothi Plascon (India) Ltd. was started in 1994 and operates in two main areas: renting out business properties and making plastic products. Its focus is on quality and new ideas. 

Gothi Plascon makes an interesting investment because it earns money from two different businesses. Their real estate income provides steady cash flow, while plastic manufacturing offers growth potential. This combination helps protect against downturns in either industry. 

Utkarsh Small Finance Bank

Utkarsh Small Finance Bank was founded in 2017 to help people who couldn't get regular banking services. It focuses on giving small loans to people in rural and small-town areas. Utkarsh Small Finance Bank also helps groups of people who support each other in paying back loans, small business owners and individuals who need money for homes or vehicles. 

This bank offers good investment prospects because millions of Indians still lack proper banking services. Small finance banks serve underbanked rural customers in growing markets. Despite healthy growth and strong asset quality, recent profit declines and price volatility require careful risk assessment before investing..

Zenith Fibres Ltd

Zenith Fibres Limited was founded in 1989 and manufactures polypropylene fibres in India. It can produce 6,000 tons of fibre annually in different thicknesses and colours. The company creates custom fibres for specific customer needs and sells yarn made from its fibres. 

Zenith Fibres represents a good investment choice because polypropylene fibres have wide uses in packaging, textiles, and industrial applications. The company has built expertise over three decades, giving it strong customer relationships. The company also exports products globally, which provides income in foreign currency and reduces dependence on just the Indian market.

What are Dividend-Paying Penny Stocks?

Penny dividend stocks are company shares that cost less and give shareholders a part of the company's profits regularly. Unlike regular penny stocks that only offer growth through price increase, these special stocks provide both growth potential and steady income through dividends.

Think of it like buying a tiny piece of a business at a low price and that business sends you a small profit share every few months. While the share price might be low because the company is small, new or facing challenges, the fact that they pay dividends often shows they care about rewarding shareholders despite their size or situation.

Some Indian companies start as penny stocks but grow into larger businesses over time. By investing early, you might get both increasing dividends and a rising share price. The good news is that the dividend payments can help reduce some of that risk by providing actual cash returns while you hold the shares.

Also Read: Fundamentally Strong Penny Stocks

How to Invest in Dividend Penny Stocks?

To buy dividend penny stocks, you first need to open a demat and trading account. You cannot buy shares directly from the stock market without these accounts. 5paisa makes this process simple and paperless. Here's how to get started:

1. Open an account - Sign up on 5paisa and complete the quick online KYC process using your Aadhaar and PAN card.

2. Download the app - Get the 5paisa Trading App to trade anytime, anywhere with easy-to-use tools.

3. Add funds - Transfer money from your bank account to your 5paisa trading account instantly.

4. Research stocks - Use research reports and a stock screener to find quality dividend penny stocks.

5. Place your order - Buy stocks through the app by selecting the company, number of shares and order type.

6. Track performance - Monitor your investments and dividend payments through the 5paisa portfolio tracker.

With our low brokerage fees and powerful trading platforms like Trade Station 2.0 and Trade on Charts, investing in dividend penny stocks becomes simple and affordable for everyone.

How to Identify the Best Dividend Penny Stocks in India?

Finding good dividend penny stocks in India takes careful research. Look beyond high yields to find companies with stable finances that can maintain payments over time.

1. Check Company Finances

Look at the company's money situation first. Good companies make a profit year after year, keep debt low and have enough cash to run the business. Healthy finances mean the company can keep paying dividends.

2. Study Dividend History

A good dividend stock pays money to shareholders regularly without fail. Look for companies that have paid dividends consistently for many years. Even better if they increase the amount over time rather than cutting payments.

3. Look at Growth Plans

The best dividend penny stocks have plans to grow bigger. Look at what new products they're making, which markets they want to enter and how they plan to beat competitors. Growth means bigger dividends later.

4. Understand the Industry

Know what business the company is in and how that industry is doing. Some industries grow fast while others shrink. Companies in growing industries with few competitors have better chances of increasing their dividend payments over time.

Metrics to Check Before Investing in Dividend-Paying Penny Stocks

Dividend Yield

This shows how much money you get back as dividends compared to the stock price. For penny stocks with dividend payments, a higher yield usually means better income. But be careful—extremely high yields (above 15%) might not last long or could mean the company is in trouble.

Dividend Payout Ratio (DPR)

This tells you what part of the company's profits goes to shareholders as dividends. For the best dividend penny stocks, look for a ratio between 30% and 60%. If it's too high, the company might not have enough money left to grow or handle tough times.

Debt-to-Equity Ratio

This shows how much a company owes compared to what it owns. When choosing penny stocks with dividend payments, look for lower numbers (under 2.0). Companies with too much debt might have to cut dividends when business gets hard.

Cash Flow

This measures the real money moving in and out of the company. The best dividend penny stocks should have positive cash flow that's growing or stable. Without strong cash flow, a company can't keep paying dividends for long, even if it shows profits on paper.

Return on Equity (ROE) and Return on Assets (ROA)

These show how well the company uses its resources to make money. For penny stocks with dividends, look for ROE above 10% and ROA above 5%. Higher numbers mean the company is making good use of its money, which helps support dividend payments.

Price-to-Earnings (P/E) Ratio

This compares the price of the stock to the company's earnings. For the best dividend penny stocks, a lower P/E often means better value. But a very low P/E might mean investors may expect problems ahead, so check why the P/E is low.

Market Capitalisation

This is the total value of all company shares. Penny stocks with dividend payments usually have higher market caps (above ₹100 crore) and are more stable. Extremely small companies might struggle to maintain dividend payments during hard times.

Factors to Consider Before Investing in Penny Dividend Stocks in India

Dividend Yield Sustainability

High dividend yields in penny stocks often look attractive but may not last. Check if the company earns enough to pay dividends regularly. A yield that seems too good usually is. Look at payout ratios to see if dividends match company earnings.

Industry Trends

Some sectors perform better with penny stocks than others. Pick industries with steady growth and a strong future outlook. Avoid declining sectors even if current dividends seem high. Companies in growing industries like IT and Solar power have better chances of continuing dividend payments over time.

Risk Assessment

Penny stocks face more problems than large companies. They often have less cash, more debt and weaker business models. Check the company's debt levels and cash holdings. High debt with low cash reserves is a warning sign for dividend stability.

Economic Downturns and Market Trends

Penny stocks suffer more during bad economic times. They usually cut dividends first when business slows. Watch how the company performed in past downturns. Also check if the stock moves with or against market trends to understand its behavior.

Risk Tolerance and Investment Timeline

Match penny stock investments with your comfort level for risk and how long you can wait. These stocks need patience, often years, to show good results. Set clear profit targets and loss limits. 

Market Conditions and Industry Trends

Pay attention to what's happening in the overall market and in the company's specific industry. Economic downturns can hurt penny stocks more than larger companies. Industry changes, like new technology or regulations, can create both risks and opportunities.
Companies that adapt well to changing conditions have better chances of continuing dividend payments during difficult times.

Conclusion 

Dividend-paying penny stocks in India offer investors a unique opportunity to generate steady income streams and potentially benefit from significant capital appreciation. 

Before buying, check if the company makes steady profits, has little debt and has paid dividends for many years. Look at the company's leaders and growth plans too. Remember that these dividend penny stocks can be risky, so only use a small part of your savings for them and do your research. 

With time, these stocks might give you both regular income and growth in value.