3 High Dividend Stocks Up More Than 30% in 2023

Investing in a stable dividend-paying company can let you sleep peacefully at night. (iStock)
Investing in a stable dividend-paying company can let you sleep peacefully at night. (iStock)

Summary

  • How have the best dividend stocks in the market performed in 2023? Find out…

There are two ways to make money in stocks. There’s the popular way - capital gains (i.e. growth) and there’s the not-so-popular way - dividends (i.e. income).

Investors tend to get obsessed with capital gains. This is understandable. Who doesn't like capital gains? The more the better.

Dividend investing is different. Dividend investors don't seek growth. Of course, they'll take the growth if they can get it. But they don't actively look for it.

What do they look for?

Stability.

Investing in a stable dividend-paying company can let you sleep peacefully at night. The business will generate a steady passive income. The more stable the business, the higher the share of profits that can be distributed.

All else being equal, a company with a high dividend payout ratio is more stable that a similarly sized competitor with a lower dividend payout.

Also, the benefit of buying dividend stocks is that the uncertainty of returns becomes low because the company pays a dividend at regular intervals.

But what about growth? How have these stocks done in 2023?

Let’s look at three top performers…

ITC

ITC is a diversified conglomerate with businesses spanning fast moving consumer goods, hotels, paperboards and packaging, agri-business, and IT.

The company is the country's leading FMCG firm and the market leader in the Indian paperboard and packaging industry.

In the agri sector, it's acknowledged globally as a pioneer in farmer empowerment through its wide-reaching agri business. In the hotels segment, it's a pre-eminent hotel chain in India.

For years, ITC was planning to gradually shift towards an asset-light model in the hospitality sector for further expansion. It's only now that the words have been put to action with its hotel business demerger plan.

Over the last decade, ITC has successfully created an array of strong brands which are either #1 or #2. They are market leaders in their respective categories.

ITC has always been considered as an attractive dividend play. Right from humble beginnings in 1994, the company has rewarded investors with a higher payout compared to its peers.

This is the one thing that makes ITC stand out. Over the years, the company's management has laid out a flexible capital allocation policy. It has said that dividend payouts will be stepped up to about 80-85% of its post-tax profits.

In financial year 2022-23, ITC paid out 15.5 per share as dividends. ITC has been paying dividends since 1994 without missing a single year in between.

ITC's dividend payout ratio in financial year 2022-23 was almost 100%. The company has come a long way in increasing its payout. Between 2003 and 2009, the company had a modest payout ratio ranging between 30-40%.

The company's 5-year average dividend payout ratio is 84.8% and its current dividend yield is 3.3%.

The stock of ITC is up 38.7% in 2023 so far compared to the 7.8% gain in the Nifty.

Hindustan Aeronautics

Hindustan Aeronautics Ltd (HAL) manufactures and maintains aircraft and helicopters for the Indian Airforce, Indian Army, ISRO, Indian Navy, and Indian Coast Guard, among others.

Recently, HAL signed a US$ 716 m deal with GE Aviation for the supplies of engines.

It has also set up a 2.1 bn Integrated Cryogenic Engine Manufacturing Facility (ICMF) that would cater to the entire rocket engine production under one roof for ISRO. This will eventually result in higher profits for the company.

Defence stocks in India have garnered significant interest for quite some time now. In a groundbreaking milestone, the Indian defence sector recently scaled new heights, surpassing a significant milestone of 1 trillion in the total value of defence production.

The company was at the forefront, taking on as many orders as it could which resulted in a substantial spike in revenue.

HAL has also announced a stock split recently where it will issue shares in the ratio of 1:2. This means a sub-division of one equity share of the company, having a face value of 10 each into two equity shares having a face value of 5 each. The record date for the same is 29 September 2023.

Since 2008, the company has declared regular dividends. In the financial year 2023, the company declared a final dividend of 55 per share, with a dividend payout ratio of 31.5%.

The five-year average dividend payout ratio stands at 33.8%. The current dividend yield is 1.4%.

The stock of HAL is up 47.7% in 2023 so far compared to the 7.8% gain in the Nifty.

Dr Reddy's Laboratories

Dr Reddy's Laboratories is an Indian multinational pharmaceutical company based in Hyderabad. It manufactures and markets a wide range of pharmaceuticals in India and overseas.

The financial year 2023 was one of the best years for Dr Reddy's Laboratories. The company's revenue came in at 245.9 billion (bn) and grew by 15% on a YoY basis. The growth was mainly driven by new product launches, partly offset by price erosion.

Its total net profit more than doubled and grew by 107% on a YoY basis to 45.1 bn. The increase was driven by new product sales with higher gross margins, higher government incentives, and favourable foreign exchange.

It launched 10 new products during the quarter and 94 new products during the year across various countries of emerging markets.

The company closed the financial year with double-digit top-line and bottom-line growth, with earnings before interest, tax, depreciation, amortisation (EBITDA) and return on capital earnings (ROCE) margin exceeding the 25% levels.

Dr Reddy's diversified global presence, capability, and strong balance sheet make it a partner of choice for various business partners.

In the financial year 2023, the company declared a final dividend of 40 per share, with a dividend payout ratio of 14.7%.

The five-year average dividend payout ratio stands at 19.3%. The current dividend yield is 0.7%.

The stock of Dr Reddy’s is up 33.4% in 2023 so far compared to the 7.8% gain in the Nifty.

If you want to dig deeper into dividend investing, use Equitymaster's powerful stock screener to check high dividend stocks and dividend growth stocks in India.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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