Growth or dividends? These five stocks offer both.

Rising US interest rates, geopolitical tensions and economic uncertainties have played a role, as have inflationary pressures, corporate earnings, regulatory shifts, and foreign investment flows.

In such a market, finding stability and growth together would be like hitting the jackpot.

Growth stocks are already attractive because of their potential for capital appreciation, but add dividends to the mix and you unlock a “double income" stream. Growth stocks help build wealth over time as their prices rise, while dividends provide steady cash flows. This combination of income and growth can significantly boost total returns, helping investors ride out market swings while steadily building wealth.

Currently, a few dividend growth stocks offer a rare combination of stability through dividends and upside through growth potential.

Read on for the details.

#1 Indian Oil Corporation

IOC is the second largest player in India’s petrochemical market and a key exporter, supplying these products to over 70 countries worldwide. The company owns and operates 11 of India's 23 refineries, with a combined refining capacity of 80.7 million tonnes per annum (MTPA).

It has a massive pipeline network stretching over 11,000 km. This impressive network boasts a throughput capacity of 85.5 mtpa for crude oil and petroleum products.

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The company has a strong track record of rewarding shareholders, with dividend yields of 13% and 10% in FY21 and FY22, respectively, followed by a healthy 3.9% in FY23 and 7.2% In FY24. Between 2020 and 2024, the average dividend payout and yield stood at 42.9% and 8.7%, respectively.

A 7-8% yield is no small feat—it means investors earn ₹7 per ₹100 invested every year as dividend income. This yield beats many savings options, combining steady cash flow with the potential for stock price gains. For those seeking income with growth potential, it’s an attractive deal.

The state-owned fuel retailer has performed exceedingly well in the past few years. After a rough patch during covid, the business is back on track.

#2 Power Finance Corporation

PFC is an established non-banking financial company (NBFC) that offers a variety of financing options, from short-term solutions to equipment leasing, for projects across the entire power spectrum (generation, transmission, distribution).

It recently expanded into infrastructure and logistics, supporting e-vehicle fleets, charging stations, roads, ports, andevensmartcity initiatives. This diversification positions it to capitalise on India's massive infrastructure push.

Moreover, itis strategically placedto benefit from growth in both power and infrastructure due to its diversification into renewables (its renewables loan portfolio grew 25% year-on-year to more than ₹60,000 crore in FY24, making it a leader in this space) and infrastructure expertise (it disbursed ₹70,000 crore in infrastructure loans by FY24 and aims to be a major player).

The company has rewarded shareholders with generous dividends for years. Over the past five years (2020-24) PFC’s dividend payout and yield averaged 22% and 7.9%, respectively.

PFC has been lending aggressively to the renewable energy sector over the past few years. As far as financials go, it has done well recently. Interest income and net profit have grown at a compound annual growth rate (CAGR) of about 11% and 15.9%, respectively, over the past five years.

#3 Banco Products

Banco Products has become a key player in the automotive and industrial cooling markets. The company manufactures and supplies various cooling modules and systems, including radiators, charged air coolers, fuel coolers, oil coolers, and metal-layered gaskets.

These products are critical in managing engine temperatures, a factor essential for the longevity and efficiency of engines across automotive and industrial applications.

Banco’s financial track record speaks to its operational resilience and focus on growth.

Over the past five years revenue has increased at a CAGR of 12%, supported by steady demand across product segments. Net profit has grown at a CAGR of 27% over this period, reflecting Banco's success in managing costs and improving operational efficiency.

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Banco’s dividend history adds to its appeal. Banco’s payout ratio has been high, supported by its debt-free balance sheet, which has allowed it to reward shareholders consistently without being weighed down by interest obligations. Between 2020 and 2024, Banco average dividend payout and yield stood at 56% and 7%, respectively.

Looking forward, Banco is expanding its product range to cater to the growing electric vehicle market, which could unlock new revenue streams and bolster its presence in domestic and international markets.

#4 ICICI Securities

ICICI Securities is involved in broking (both institutional and retail), financial product distribution, merchant banking, and advisory services.

As the broking arm of the ICICI group and a subsidiary of ICICI Bank, the company also offers wealth management and distributes a wide range of financial products.

ICICI Securities has been a generous dividend payer, with an average payout ratio of 57.7% and a steady yield of 4.5% over 2020-24. This commitment to returning more than half of its earnings to shareholders underscores the company's dedication to rewarding its investors, even during challenging times.

Recently, ICICI Securities faced headwinds as its revenue is closely tied to the broader equity markets, resulting in a notable decline in broking revenue due to its higher reliance on cash volumes.

In response, the company has diversified its revenue streams, introducing new tools and products for the derivatives segment and increasing the penetration of its margin trading funding (MTF) among customers.

It has also expanded its product lineup with offerings in loans and general insurance, moves that are expected to boost revenue going forward. This approach has started to yield results, with the company reporting strong performance in FY24.

Between 2020-2024, sales and net profits have registered a CAGR of 13.9% and 19.7%, respectively. Returns have also been range-bound, with RoCE and RoE averaging at a solid 28.7% and 55.8% over five years.

#5 Ksolves India

Ksolves India is a technology solutions provider that offers expertise in artificial intelligence and machine learning (AI/ML) integration, big data analytics, and enterprise application development.

The company delivers a suite of products and services aimed at boosting business efficiency and driving digital transformation. It has been a consistent dividend payer since 2021, with the dividend payout averaging an admirable 62.8% and dividend yield 3.25%.

Ksolves has achieved significant milestones In its 12-year journey and now boasts a team of 520 employees across over 30 countries, serving more than 150 clients.

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In FY24, the company brought more than ₹100 crore in revenue, with 82% of this coming from repeat customers. The top five clients contributed 38% of total revenue.

North America emerged as a major revenue driver, accounting for 78% of overseas revenue, while Europe and Australia contributed 10% and 9%, respectively. The rest of the world added a modest 3%, resulting in a total overseas revenue share of 79%.

The company's revenue and net profit multiplied between 2020 and 2024. Its strong market presence is further reinforced by its participation in global AI/ML events and strategic partnerships with RedHat, Amazon Web Services, and Google Cloud.

Noteworthy projects include developing automated academic assessments and a custom data migration solution for a German client, which showcases the company’s ability to tackle complex challenges.

Conclusion

While market volatility persists, focusing on quality dividend stocks can provide a sense of security and long-term financial stability. These stocks offer a steady stream of income, mitigating the impact of short-term market fluctuations.

However, investors must keep a close eye on their operational performance, ability to scale, and strategic execution in this evolving landscape. By staying informed and proactive, investors can seize potential upsides while managing risks.

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