Highest Dividend Yield Stocks in India

What is Dividend Yield?

Dividend yield is a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price. It's calculated by dividing the annual dividends per share by the current share price. For example, if a company pays ₹10 per share annually and its stock price is ₹200, the dividend yield is 5%. This metric helps investors assess the income-generating potential of their investments. 

Top 10 Dividend Yield Stocks

Overview of Dividend Yield Stocks

Here are detailed overviews of the top 10 high dividend yield stocks:

1. Taparia Tools

Taparia Tools is a prominent player in the manufacturing sector, known for its high-quality hand tools and fasteners. With a Current Market Price (CMP) of ₹8.35, it boasts a remarkable dividend yield of 30.07%. The company's focus on quality and durability has earned it a strong reputation in both domestic and international markets. Despite facing challenges typical in manufacturing, its consistent dividend payments indicate a commitment to shareholder value, making it an attractive option for investors seeking income.

2. Jagran Prakashan

Jagran Prakashan, trading at ₹85.38, is one of India's largest media and communications conglomerates, best known for its flagship newspaper, Dainik Jagran. With a P/E ratio of 11.43 and a dividend yield of 5.86%, the company benefits from a diverse portfolio that includes radio, digital media, and event management. Despite the challenges posed by the digital revolution, Jagran's robust advertising revenues and strategic investments in new media ensure its position as a significant player in the industry, appealing to both income-focused and growth-oriented investors.

3. Coal India

Coal India, the stateowned coal mining giant, has a CMP of ₹461.10 and a dividend yield of 5.53%. As the largest producer of coal in the world, it plays a crucial role in India's energy sector. With a P/E of 7.78, the company generates significant profits, contributing to its ability to provide consistent dividends. Despite challenges such as environmental concerns and competition from renewable energy sources, Coal India's established market presence and government backing make it a stable investment option for those seeking reliable income through dividends.

4. Abirami Fin.

Abirami Financial Services, with a CMP of ₹48.44, focuses on providing financial services, including investment and lending. Although it has a relatively low P/E ratio of 17.44, the company offers a dividend yield of 5.16%. Abirami's strategies in catering to underserved markets position it well for growth, despite the competitive financial landscape. Its commitment to returning profits to shareholders through dividends demonstrates a focus on shareholder value, making it an appealing choice for conservative investors looking for stability and income.

5. VST Industries

VST Industries, trading at ₹310.65, is a key player in the tobacco industry, particularly in the production of cigarettes. With a P/E of 21.70 and a dividend yield of 4.39%, the company has maintained a solid performance through effective branding and distribution strategies. While the tobacco sector faces increasing regulatory scrutiny and changing consumer preferences, VST's established market position and ability to adapt to market conditions provide a level of stability. Investors seeking income may find VST to be a reliable option, given its history of consistent dividend payments.

6. Standard Industries

Standard Industries, with a CMP of ₹24.64, operates in various sectors, including manufacturing and trading. Its high P/E ratio of 126.33 may suggest market volatility or investor speculation. However, the company offers a dividend yield of 4.26%, indicating a commitment to rewarding shareholders. Standard Industries' diversified business model positions it to navigate economic fluctuations effectively, appealing to investors who prioritize income generation alongside potential capital appreciation. Its focus on operational efficiency may enhance its profitability in the long term.

7. Ujjivan Small Finance Bank

Ujjivan Small Finance Bank, with a current price of ₹35.77, is a significant player in India's banking sector, focusing on providing financial services to underserved segments. The bank has a P/E of 5.92 and a dividend yield of 4.22%. Ujjivan's strong growth trajectory, driven by its innovative financial products and expanding customer base, positions it as a compelling choice for incomefocused investors. Its commitment to financial inclusion and prudent risk management reflects its dedication to sustainable growth, making it a valuable addition to any dividendfocused portfolio.

8. Ador Fontech

Ador Fontech, trading at ₹142.50, specializes in manufacturing welding and cutting equipment. With a P/E of 21.97 and a dividend yield of 4.21%, the company has established itself as a reliable supplier in the industrial sector. Ador's strong brand recognition and commitment to innovation allow it to maintain a competitive edge. Despite facing challenges related to industrial demand fluctuations, its history of consistent dividend payouts indicates a solid financial position, making it an attractive option for investors seeking both income and longterm growth potential.

9. Ruchira Papers

Ruchira Papers, with a CMP of ₹119.37, is engaged in the manufacturing of paper and paper products. The company has a P/E ratio of 8.44 and a dividend yield of 4.19%. Ruchira has carved a niche in the ecofriendly paper segment, appealing to environmentally conscious consumers. Despite the competitive landscape of the paper industry, Ruchira's focus on sustainability and quality positions it for growth. Its consistent dividend payments reflect a commitment to shareholder value, making it a compelling choice for investors looking for stable income streams.

10. Mawana Sugars

Mawana Sugars, trading at ₹102.83, is a prominent player in the sugar manufacturing industry. With a P/E of 8.28 and a dividend yield of 3.89%, the company has shown resilience in a volatile market. Mawana's focus on expanding its product range and improving operational efficiency has contributed to its stable financial performance. Despite challenges related to fluctuating sugar prices and regulatory changes, Mawana's commitment to returning profits to shareholders through dividends underscores its reliability as an incomegenerating investment, appealing to conservative investors.
 

Benefits of Dividend Yield Stocks

Possibility of Greater Total Returns: The top ten dividend stocks in India have the ability to increase in value in addition to paying dividends. Stocks with high dividend yields have historically fared better than those with little or no dividends, providing larger long-term gains. This promise has been regularly fulfilled by some of India's top dividend stocks.

Reduced Risk: Businesses that pay large dividends are often well-established, financially secure, and generate steady profits. Because of this, the top dividend-paying companies in India are less risky and volatile than other equities. The top ten dividend stocks, for example, are typically thought of as safer choices.

Protection Against Inflation: Dividend income acts as a buffer against inflation. Dividend payments, in contrast to fixed-income assets, often rise over time, preserving buying power. Long-term inflation protection is guaranteed when you invest in firms that pay out significant dividends.

Tax Benefits: The finest dividend-yielding equities in India may occasionally have lower tax rates than other investment income streams like interest income. As a result, dividends from the majority of shares that pay them out might offer substantial tax advantages. Before purchasing the best dividend-paying stocks in India, it's crucial to match these advantages with your own investing objectives and risk tolerance.

Disadvantages of Dividend Yield Stocks

Fool's Gold Dilemma: Although large dividends may be enticing, investors should carefully consider the factors that contribute to the shares' high dividend yield. A noticeably high dividend yield could be a sign of the company's financial difficulties, as share values may be declining as a result of these issues.

Interest Rate Risk: Dividend-paying stocks are especially vulnerable to shifts in interest rates. Low interest rates make these equities more appealing, but a change in monetary policy—such as the Federal Reserve raising interest rates—can change the situation. Investors find the prospective rewards from risk-free government bonds, such as Treasury bonds, more alluring than dividends as interest rates rise.

How to Buy Dividend Yield Stocks?

To buy dividend yield stocks in India, start by researching companies that consistently pay high dividends. Look for sectors like utilities or consumer goods known for reliable payouts. Open a trading account with a reputable brokerage, fund your account, and use the brokerage platform to purchase shares of these high-yield companies. Regularly review and adjust your portfolio to maximize returns.

Taxation on Dividend Yield Stocks

Dividend Tax Exemption: Dividends from Indian companies were tax-exempt for investors until 31 March 2020 due to the company-paid Dividend Distribution Tax (DDT).

Tax Change: From 1 April 2020, dividends are taxable for investors; the Finance Act, 2020 removed DDT and the 10% tax on dividends over ₹10 lakh.

TDS on Dividends: The Finance Act, 2020 introduced TDS at a 10% rate on dividends exceeding ₹5,000. TDS was reduced to 7.5% from 14 May 2020 to 31 March 2021 as a COVID-19 relief.

Tax Credit: Deducted TDS can be credited against total tax liability when filing the income tax return (ITR).

Resident Example: If Mr. Ravi received ₹6,000 in dividends on 15 June 2023, 10% TDS (₹600) was deducted, leaving him with ₹5,400. His dividend income is taxable at FY 2023-24 rates.

Non-Resident TDS: Non-residents face a 20% TDS rate, subject to DTAA. Reduced rates require Form 10F, beneficial ownership declaration, and a tax residency certificate. Higher TDS is claimable in the ITR.