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Conservative investors rush towards high dividend paying stocks in volatile times to be sure to make some money as they fear uncertain capital gains in these markets. (Photo: iStock)
Conservative investors rush towards high dividend paying stocks in volatile times to be sure to make some money as they fear uncertain capital gains in these markets. (Photo: iStock)

Here are the top 10 highest dividend-paying stocks

These top 10 companies have been consistently paying dividends over the last five years.

In volatile times, investors rush towards high dividend paying stocks to be sure to make some money as they fear uncertain capital gains in these markets. Conservative and moderate investors usually fall in this category as they want stable returns or growth and downside protection which high dividend yield stocks often offer. "Conservative investors and even retired investors who want stable income flow from stocks prefer dividends especially if they are not in the highest tax bracket," says Deepak Jasani, head of retail research, HDFC Securities. Aggressive investors want capital gains.

We have taken out a list of top 10 dividend-paying stocks with the highest market capitalisation. Only those companies with a minimum market capitalisation of 500 crore were considered. These companies have been consistently paying dividends over the last five years. These companies have either sustained or increased their dividend pay out steadily in the last five years. The data was taken from Value Research, an independent research firm.

Here's the list of top 10 dividend-paying stocks with highest market cap.

Stock, Dividend Payout Ratio(%), Dividend Yield(%)

  • ITC 81.51, 5.20
  • Hindustan Zinc 102.44, 7.02
  • Power Grid Corporation of India 43.43, 5.41
  • Indian Oil Corporation 48.87, 10.46
  • Bharti Infratel 58.87, 5.13
  • Petronet LNG 69.36, 5.08
  • Pfizer 296.54, 6.80
  • Sun TV Network 71.13, 5.16
  • Procter & Gamble Health 87.09, 8.71
  • SKF India 222.40, 7.78

Data as on August 28; Source: Value Research

Some investors see regular dividends as a measure of health of the company. Initiating a dividend or increasing a dividend sends a positive signal, whereas cutting a dividend or omitting a dividend typically sends a negative signal to investors. However not all the companies paying high dividends may have healthy profit and loss account and balance sheet. Investors should not fall for a company merely on the basis of high dividend payouts. He or she should check several other factors to gauge whether the dividends are sustainable.

"Along with the level of dividend yield, investors check whether the company borrows to pay the dividend, and the company’s past dividend record. Also they check whether its cash flows and earnings are stable, growing or volatile. Every company follows a set of principles guiding cash dividends," says Deepak Jasani.

For a company, several factors appear to influence dividend policy, including investment opportunities for the company, the volatility expected in its future earnings, financial flexibility, tax considerations, and contractual and legal restrictions.

Jasani explains that some companies use a stable dividend policy, and try to align its dividend growth rate to the company’s long-term earnings growth rate. Dividends may increase even in years when earnings decline, and dividends will increase at a lower rate than earnings in boom years. Companies with outstanding debt often are restricted in the amount of dividends they can pay because of debt covenants and legal restrictions.

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