The corporate results season for the March 2022 quarter is about to kick start in a few days. This being the last quarter of the fiscal, companies will declare their annual results for 2021-22. Many companies also announce annual dividends and special dividends at the fiscal end. So this is the right time to invest in high dividend-paying stocks if you are looking for dividend income.
We have put together ten stocks with a dividend yield of 3 percent or more based on their current stock price and the total dividend paid per share in FY21. We have only selected companies that reported earnings growth in FY22 and have the headroom to maintain or raise the share of net profit that they share with shareholders (payout ratio) by way of dividends.
So we have listed companies with a payout ratio of around 50 percent or less. We have also screened companies for their latest return on equity (RoE).
1. The public sector non-bank lender Power Finance Corp is at top of our list with a current dividend yield of 8.3 percent which translates into an annual pre-tax passive income of Rs 8300 for an investment of Rs1 lakh in the stock. Its RoE is quite high at 28 percent. The company is expected to maintain its payout ratio as its net profit was up 21.2 percent year-on-year during the first nine months of FY22.
2. REC Ltd (formerly Rural Electrification Corporation) is next with a dividend yield of 9.6 percent at its current stock price. Investors can expect the lender to maintain its payout ratio given its high RoE of 21 percent and 23.3 percent growth in the company’s net profit during 9MFY22. It helps that the company had a relatively low payout ratio of just 30 percent in FY21.
3. The crude oil refiner & marketer Indian Oil Corporation (IOC) is next on the list with a pay-out ratio of 9.54 percent – one of the highest among the top companies in the country. The company’s net profit was up 39.1 percent Y-o-Y in 9MFY22 and it reported a high RoE of 21 percent in FY21.
4. Country’s top iron ore miner NMDC is number four on our list. The stocks offer a dividend yield of 4.6 percent with a relatively low level of pay-out ratio of 36.3 percent. The company’s net profit was up 122 percent during the first nine months of FY22. This provides NMDC with enough room to step-up its final dividend payout for FY22.
5. The lubricant maker Gulf Oil Lubricants is next on our list. The stock has a dividend yield of 3.6 percent with a dividend payout ratio of 40 percent in FY21. The company’s net profits were up 24.5 percent in 9MFY22 which will allow it to pay a higher dividend in FY22.
6. Power Grid Corporation is next with a dividend yield of 3.14 percent and a return on equity of 18 percent. It reported a dividend pay-out ratio of 42 percent. The company’s net profit was up 51.7 percent during the first nine months of FY22 which means that investors can expect a big rise in its final dividend payout for FY22.
7. The country’s top power generator NTPC is next with a dividend yield of 4.1 percent and RoE of 12.2 percent. The company has a payout ratio of 43 percent that it can maintain even in the current fiscal. The company’s net profits were up 12.9 percent in 9MFY22.
8. ICICI Securities is next on our list with a dividend yield of 3.3 percent and a return on equity of 67 percent. The company’s net profit was up 41 percent during 9MFY22 so investors can expect a double-digit rise in dividend payout by the company in FY22.
9. Indian Railway Finance Corporation (IRFC) also made it to our list with a dividend yield of 4.7 percent at its current stock price and a return on equity of 13.3 percent. The company had a relatively low payout ratio of 31 percent. Its net profit was up 57 percent in 9MFY22 and investors can expect a big step-up in dividend pay-out by the company in FY22.
10. Cigarettes maker and ITC associate VST Industries is the 10th company on our list. The stock offers a dividend yield of 3.6 percent and a return on equity of nearly 34 percent. The company paid nearly half of its net profit in FY21 and thus investors can expect it to maintain its payout ratio or even raise it in FY22.
(Advice: This article is for information purpose only. Readers are advised to consult a certified financial advisor before making investment in any of the funds or securities mentioned above.)
(Karan Deo Sharma is a Mumbai-based finance and equity markets specialist).