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Top 10 dividend yield stocks' 5-year average returns are better than FDs

Dividends can be referred to as passive income on your stock investments.Premium
Dividends can be referred to as passive income on your stock investments.

  • IDBI Capital has released its quality dividend yield report for December 2022. The top 10 dividend yield stocks' 5-year average returns are better than traditional FD schemes who offer interest rates in the range of 3-10% depending upon various tenures.

Indian markets have recorded notable gains since last month with Sensex and Nifty 50 clocking fresh lifetime highs as well. However, the start of this week has been bearish as investors cash in their profits. That being said, investors who are looking to invest in stocks in a record-high market, can always get a taste of dividend yield stocks. IDBI Capital has released its quality dividend yield report for December 2022. In their coverage, the top 10 dividend yield stocks' 5-year average return on equities are better than traditional FD schemes who offer interest rates in the range of 3-10% depending upon various tenures.

Here's the list of top 10 dividend yield stocks and their performance as per IDBI Capital report: 

1. NMDC:

As per the IDBI Capital report, NMDC has the highest dividend yield of 12.3%. Its latest dividend payout was 46.06%. Generally, the dividend payout refers to the amount of dividends paid to shareholders in regard to the net income a company generates for a fiscal year.

The company's latest dividend per share would be 14.7 per equity share in FY22. Meanwhile, its 5-year average return on equity (RoE) is 19.73%.

2. REC:

The Power Ministry-backed REC has the second-highest dividend yield of 12%. Its latest dividend payout stood at 30.11%, while the latest dividend per share came in at 13.3 for FY22. The company's 5-year average RoE is 17.48%.

3. GAIL (India):

The New Delhi-based GAIL has a dividend yield of 10.7% -- being the third highest dividend yield stock. The government-owned firm's latest dividend payout is 36.23% while its latest dividend per share is around 10 in FY22. The 5-year average return is 13.31%.

4. Power Finance Corporation:

Indian power sector financial services provider, PFC has a dividend yield of 10.1%. Its FY22 dividend payout was around 22.61%, while the dividend per share is around 14 to shareholders. The company's 5-year average ROE is 25.67%.

5. HUDCO:

HUDCO's main objective is to provide financial support to housing and infrastructure projects in the country. The government-owned company has a dividend yield of 9.3%. In FY22, its dividend payout was around 40.82%, while the dividend per share came in at 4.9 to investors. 5-year average ROE is at 12.26%.

6. Coal India:

Coal India, the largest government-owned coal-producer in the world, has a dividend yield of 9.1%. The company's latest dividend payout is 60.36% in FY22 and the dividend per equity share of 20.5 to investors. The coal producer's 5-year average ROE is 48.81%.

7. Phillips Carbon Black:

Phillips Carbon Black, the largest carbon black manufacturer in India, has a dividend yield of 7.1%. In the fiscal ending March 30, 2022, the company's dividend payout came in at 44.31% while the dividend per share stood at around 10 per share to shareholders. Its 5-year average ROE is 19.36%.

8. Power Grid Corporation Of India:

Government-backed Power Grid is engaged in the transmission of bulk power across various states in India. As of now, its dividend yield is at 6.7%. The company's latest dividend payout was 61.16% in FY22 -- which is the highest among the top 10 dividend yield stocks. While its latest dividend per share is around 14.8 apiece. The 5-year average ROE is 22.99%.

9. Ircon International:

Indian Railways-backed IRCON also has a dividend yield of 6.7%. In FY22, its dividend payout was around 39.69%, while the dividend per share came in at 4.2 per share. The 5-year average ROE is 10.61%.

10. MOIL:

Miniratna state-owned manganese ore mining company, MOIL has a dividend yield of 6.5%. The company's dividend payout was around 32.39% in FY22, while the dividend per share stood at 10.9 apiece. The 5-year average ROE is around 12.28% of the stock.

Other dividend yield stocks are --- Oracle Financial Services, Hindustan Zinc, and NTPC having a dividend yield of 5.9% each, while Polyplex Corp holds a yield of 5.8%, Rites has a yield of 5.4%, and Indus Towers with a yield of 5.4%. Stocks like NHPC and ITC have a yield of 5.1% each, while Swaraj Engines has a yield of 5%.

Generally, companies listed on exchanges share a certain portion of their net incomes for a particular fiscal year with their shareholders in the form of incentives, among which are also dividends. Listed firms announce their dividends for a financial year, in a periodic format, and pay to the eligible shareholders.

Dividends can be referred to as passive income on your stock investments. Under this incentive, a company with a high dividend yield is considered to be safe. Dividend yields are the ratio of dividends paid per equity share to shareholders on the current price of the equity share. Dividend yields change according to the stock price. So when a stock is falling, the dividend yield will tend to be higher, while it will be lower if a stock is rising.

In simple words, stocks that have high dividend yield compared to benchmarks like Sensex and Nifty 50 are seen as high dividend yield stocks which gives a fair understanding of the share's price value. The high dividend yield stock hints that the stock is typically under-priced by the market and has more potential ahead. Also, in case of a slide down in markets, these dividend yield stocks are likely to give higher yields due to their higher dividend payouts.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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