Top Dividend Paying Stocks

How Dividend Taxation Works in India?

In India, dividends are treated differently from capital gains. They have a common tax treatment for individuals and Hindu Undivided Families (HUFs). If your total income exceeds the basic exemption limit (BEL), you must file an income tax return. If your dividend income exceeds ₹ 5,000 in a financial year and your total income is below the BEL, you need to file a tax return, and any deducted tax will be refunded to you.

Now, let's understand the two types of dividends and their tax implications:

• Qualified Dividends: These are dividends received when you hold stocks for 61 days or more during a 121-day period before the ex-dividend date of the stock.
• Taxation: Qualified dividends are treated as long-term capital gains and are taxed at the long-term capital gain rate.
• Ordinary Dividends: These dividends are received when you hold stocks for less than 61 days.
• Taxation: Ordinary dividends are taxed at your regular income tax rate based on your income slab.
•  For long-term capital gains (LTCG) exceeding ₹ 1 lakh in a fiscal year, a 10% tax rate is applied.
Remember, if your dividend income is above ₹ 5,000 and your total income is below the basic exemption limit, you need to file an income tax return to get any deducted tax refunded.

Maximize Returns with THESE FIVE High Dividend Stocks

Factors to be consider before investing in dividend-paying stocks:

• Growth Expectations: Dividend stocks may not offer immense growth like some non-dividend companies.
• Stable Income: Dividend stocks are ideal for those seeking a stable income over time from established, steady companies.
• Goal Setting: Set annual return goals and choose stocks with 5% to 15% growth along with dividends for a steady investment approach.

1. Vedanta Ltd.

Vedanta Ltd. is a diversified natural resource group engaged in exploring, extracting and processing minerals and oil & gas. The group engages in the exploration, production and sale of zinc, lead, silver, copper, aluminium, iron ore and oil & gas. It has presence across India, South Africa, Namibia, Ireland, Liberia & UAE.

Its other businesses include commercial power generation, steel manufacturing & port operations in India and manufacturing of glass substrate in South Korea and Taiwan. Presently, India accounts for ~65% of total revenues, followed by Malaysia (9%), China (3%), UAE (1%) and others (22%).

Key Highlights:

I. Vedanta commenced operations at its first gas and condensate production facility at Jaya Field in OALP block, marking a significant milestone.
II. The company started India's only nickel cobalt operations at Nicomet, enhancing its presence in the nickel market.
III. Vedanta Resources, the parent company of Vedanta Ltd, successfully repaid debt of approximately $250 million, with $150 million from Barclays and $100 million from Standard Chartered Bank, improving its financial position.

Key Risk:

Volatility in commodity prices remains a concern for Vedanta, which could impact its financial performance in the future.

Financial Performance:

I. Vedanta's revenue improved by 10.5% QoQ to reach ₹  37,225 crores, driven by increasing sales across segments and higher output commodity prices.
II. EBITDA rose significantly by 45.6% QoQ to ₹  10,287 crores in Q4FY23, supported by ramped-up volume across segments, easing input commodity inflation, and improved output commodity prices. The EBITDA margin grew by 660 basis points to 27.6%.
III. However, the company's Profit After Tax (PAT) fell by 22.2% sequentially to ₹  1,918 crores in Q4FY23 due to increasing financial costs (14.8% QoQ) and an elevated effective tax rate (+31% QoQ).

Outlook:

I. Vedanta continues to deliver strong operating performance across various segments, achieving record production levels in aluminium, zinc, and steel.
II. The company is planning capacity expansions for aluminium at Balco and JSG VAP, which could further boost its revenue and profitability.
III. Improved operational efficiencies, cost initiatives, and strong marketing efforts bode well for Vedanta's long-term growth prospects. However, the volatility in commodity prices remains a key risk to monitor. The overall outlook for the company remains positive, but the current price levels indicate limited upside potential. Therefore, we reiterate our HOLD rating on the stock with a revised target price of ₹  308 based on 4.3x FY25E EV/EBITDA.

Key Ratios:

Vedanta Ltd Share Price

2. Hindustan Zinc Ltd.

Hindustan Zinc, founded in 1966, is a leading company with over 50 years of experience in zinc-lead mining and smelting. It has received recognition for its sustainability efforts and is ranked 1 in the Metals and Mining Category in the Dow Jones Sustainability Index for the Asia Pacific region in 2019. HZL is known for being one of the world's most cost-efficient zinc producers and is unique in India as it's the only company that produces zinc, lead, and silver together.

Key Highlights:

I. Hindustan Zinc reported revenue of ₹  85 billion in Q4FY23, down 3% YoY but up 8% QoQ, in line with expectations.
II. EBITDA stood at ₹  43 billion, down 14% YoY but up 15% QoQ, aided by lower power and fuel costs, higher volumes, and favourable LME movement. EBITDA margin reached 50%.
III. Cost of production (CoP) reduced to USD 1,214/t in Q4FY23 from USD 1,293/t in Q3FY23 due to lower coal prices and strong operational performance.

Key Risk:

Higher depreciation and interest costs impacted Hindustan Zinc's APAT, leading to a 12% YoY decline despite improved operational performance.

Financial Performance:

I. Refined zinc sales for Q4FY23 stood at 216kt, up 1% YoY and 3% QoQ, while refined lead sales were 54kt, up 10% YoY and 17% QoQ. Silver sales reached 182t, up 12% YoY and 13% QoQ, driven by better plant and mined metal availability.
II.  For FY23, the company achieved its best-ever full year refined metal production of 1,032kt, up 7% YoY, with refined zinc sales at 821kt (up 6% YoY), refined lead sales at 211kt (up 10% YoY), and silver sales at 714t (up 10% YoY).

Outlook:

I. Hindustan Zinc retains its FY24 guidance with an expected mined metal production of 1,075-1,100kt and refined metal production of 1,050-1,075kt. Saleable silver is projected to be in the range of 725-750t.
II. The company plans to become a net-zero emission company by 2050 and has approved investments in a renewable energy (RE) plant for further strengthening this vision.
III. The project capex is expected to be in the range of USD 175-200m for a fertilizer facility and RE power. Additionally, the maintenance capex is expected to be around USD 400m for mine development and equipment purchase.

Key Ratios:

Hindustan Zinc Ltd. Share Price

3. Sanofi Ltd.

Sanofi India is engaged in Business of Manufacture and sale of pharmaceutical products.

Key Highlights:

I. Strong quarter: Sanofi India reported robust earnings for Q1CY23, surpassing estimates on all fronts. Revenues reached ₹  736.5 crore, up 4.2% YoY, exceeding the internal estimate of ₹  620.7 crore.
II. Improved Margins: Gross margins increased by ~100 bps YoY and ~50 bps QoQ to 58.6%, attributed to a favourable product mix and lower raw material costs. EBITDA margins surged by ~370 bps YoY to 31.2%, far above the internal estimate of ~26.5%.
III. Demerger of Consumer Healthcare Business: Sanofi India has proposed a de-merger of its consumer healthcare business into a separate company called Sanofi Consumer Healthcare India Ltd. (SCHIL). The move is expected to unlock value for shareholders and lead to value unlocking for Sanofi India.

Key Risk:

Lantus Price Reduction: The inclusion of Sanofi's key product, Lantus, in the National List of Essential Medicines (NLEM) is likely to result in a ~21% YoY decline in its price from April 2023. However, expected growth in base business and increased volumes for Lantus should mitigate the impact of the price fall.

Financial Performance:

I. Revenue for Q1CY23 was ₹  736.5 crore, up 4.2% YoY, beating internal estimates.
II. EBITDA stood at ₹  229.9 crore, up 18.2% YoY, with EBITDA margins at 31.2%, far above internal estimates.
III. Adjusted PAT reached ₹  172.6 crore, rising by 15.2% YoY (reported PAT declined ~20.1% YoY to ₹  190.4 crore), surpassing internal estimates.

Outlook:

I. Sanofi India's strong performance is expected to continue, driven by growth in anti-diabetic, cardiology, vaccines, and CNS products, as well as rationalization of operations.
II. The proposed demerger of the consumer healthcare business is likely to unlock value for shareholders 
III. The stock's attractive valuations (~25.1x CY23E and ~23.2x CY24E EPS) and growth visibility from chronic therapies support a Buy recommendation with a revised PT of ₹  7,500 (at a ~5% discount to its historical average) based on ~27.0x CY24 EPS.

Key Ratios:

Sanofi Ltd. Share Price

Conclusion:

Vedanta Ltd reported strong results with improved revenues and EBITDA margin. The company achieved significant milestones with its gas production facility and nickel cobalt operations. Hindustan Zinc showed steady performance, with a reduction in cost of production and growth in key products. It plans to unlock value through the de-merger of its consumer healthcare business. Sanofi India reported robust earnings for Q1FY23, surpassing estimates, and plans for a de-merger to unlock shareholder value.