Top 5 dividend stocks set for a big rebound in 2024

High dividend stocks are a favourite of investors. (Image: Pixabay)
High dividend stocks are a favourite of investors. (Image: Pixabay)

Summary

  • These five beaten down dividend-paying companies could rebound sooner than you think. Do you own?

Over the past year, several stocks known for their high dividend payouts have experienced downturns for a variety of reasons. With these stocks now trading at attractive valuations and notably below their 52-week highs, they offer a excellent opportunity for investors in search of both dividend income and potential capital gains.

This article will explore five dividend stocks poised for a potential rebound in 2024.

#1 Indraprastha Gas

Topping our list is Indraprastha Gas, a forerunner in the city gas distribution industry within Delhi and its surrounding regions. The company specializes in supplying compressed natural gas and piped natural gas for vehicles, homes, and industries.

Its early entry into the market has granted it a competitive edge, securing exclusive rights to marketing and infrastructure in its operational zones.

Indraprastha Gas boasts a consistent dividend history since 2004, with an average dividend payout ratio of 27.6% over the past five years and a current yield of 3.1%.

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(Equitymaster)

The stock faced a decline following the Delhi government's announcement to transition its vehicles to electric within five years, impacting the company's future revenue and market share.

In response, Indraprastha Gas plans to invest 12 billion in expanding its network from 2024 to 2026, funded entirely through internal accruals. Collaborations and innovative projects like the H-CNG station, along with backward integration strategies such as in-house gas meter production, position the company for revenue and profit growth in the medium term.

#2 UPL

Next is UPL, a global leader in agrochemicals, industrial chemicals, and specialty chemicals, as well as seeds. Operating in over 140 countries, UPL is the fifth-largest agrochemical and fourth-largest seed company worldwide. Despite a dividend track record since 2004, with a five-year average payout of 20.6% and a current yield of 1.9%, its stock took a hit due to declining chemical prices and a heavy debt load.

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However, UPL's long-term performance remains strong, with a focus on debt reduction and cost efficiencies aimed at boosting financial health.

Debt has moderated, and revenue and net profit have also grown at a CAGR of 19.5% and 22.9%, respectively. The company aims to reduce its gross debt by $500 million by March 2024.

Moreover, the company's commitment to product diversification promises to enhance revenue and profit, suggesting a recovery on the horizon.

#3 HDFC Bank

HDFC Bank, the largest private sector bank in India, is renowned for its robust balance sheet and minimal non-performing assets (NPAs), or bad loans, ensuring steady dividends even in challenging times. Recent pressures on its share price were attributed to an increased loan-to-deposit ratio and a slight uptick in NPAs post-merger.

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Nonetheless, HDFC Bank's expansion into housing loans and untapped markets post-merger is expected to fuel its growth and customer base expansion.

#4 IG Petrochemicals

IG Petrochemicals, a key player in producing phthalic anhydride (PAN), maleic anhydride, and benzoic acid, stands out as the world's most cost-effective PAN producer. The company has has been consistently paying dividends to its shareholders since 2015 with a steady increase in dividend payout.

In the last five years, the average dividend payout was 15.9%, and the current dividend yield is 2%.

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Despite a share price drop in September 2023, the company's expansion plans to increase PAN production capacity significantly by the end of FY24 indicate promising revenue growth potential.

It is also considering manufacturing derivatives of PAN, which will help improve profit margins.

#5 Sharda Cropchem

Rounding out the list is Sharda Cropchem, known for exporting agrochemicals and various non-agro products through a cost-efficient outsourcing model. The company has been paying consistent dividends to its shareholders since 2015 and has a five-year average dividend payout of 18.7%.

Following its Q1 results for financial year 2024, the company’s revenue and profit fell in Europe and LATAM regions due to inflation, adverse market conditions, and recession.

Hence, the company’s share price also took a beating and fell by almost 18% in the last year.

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Despite recent setbacks in Europe and LATAM, ongoing investments in product development and market expansion strategies are set to drive future growth, supported by increasing global demand for agricultural products.

It also plans to expand its distribution base, enter new markets, and focus on cost-cutting initiatives to improve its revenue and margins.

Financial Snapshot of High Dividend Stocks

Here’s a table showing the above companies on various important parameters for easy reference.

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(Equitymaster)

These companies have a good chance to rebound in 2024. They are fundamentally strong and have high growth prospects.

However, it is important that you do your research and due diligence before considering these companies for investment.

Happy Investing!

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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