Best long term dividend stocks in India

“An investment in knowledge pays the best interest.” – Benjamin Franklin

As a beginner in the stock market, one thing which definitely pops up in our mind when we think about equity shares is dividend.

Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. It can be issued in various forms, such as cash payment, stocks or any other form.

A company’s dividend is decided by its board of directors and it requires the shareholders’ approval. However, it is not obligatory for a company to pay a dividend.

Dividend is usually a part of the profit that the company shares with its shareholders.

Dividends send a clear, powerful message about future prospects and performance of the company and are one of the best ways for companies to communicate their willingness and ability to pay steady dividends over time thereby indicating their financial well-being.

In order to receive these dividends, you must invest in those shares. But on what basis will you decide whether to invest in a particular company’s shares?

By looking at the financial statements, you say? But those statements contain so many figures and so much of excess data is burdened on us.

There are the Balance Sheets, the Trading and Profit and Loss Accounts, the Cash Flow Statements and so many other financial statements to look into.

How can one decide which information is valuable in making investment decisions?

This is where Investment valuation ratios come in and attempt to simplify this evaluation process by comparing relevant data that help users gain an estimate of valuation.

For example, the most well-known investment valuation ratio is the P/E ratio, which compares the current price of company’s shares to the amount of earnings it generates.

There are various other ratios like Price/Book Value Ratio, Price/Cash Flow Ratio, Price/Sales Ratio, Dividend Yield, etc.

Dividend yield is a useful financial ratio for stock picking. In the absence of any capital gain, it indicates the total return of the investment.  You may simply consider dividend yield as an interest rate on your investment. It is calculated as-

 

So we have compiled a few companies for the dividend analysis today and the companies are as follows:

  1. Noida Toll Bridge Company
  2. Indiabulls Ventures Limited
  3. Clariant Chemicals Limited
  4. Rural Electrification Corporation (REC)
  5. Power Finance Limited
  6. Hindustan Zinc Limited
  7. Bajaj Corporation
  8. Oracle Financial Services
  9. NMDC Limited

Note:

1.) All the values are in INR unless stated otherwise

2.) Annual Dividend Yield may vary from the given values due to fluctuations in the current prices.

References: All the provided facts and values (except statistics) have been taken from the various pages of following websites:

                                                                                1.)http://www.moneycontrol.com/

                                                                               2.)http://performance.morningstar.com/

 

Noida Toll Bridge Company

The following table shows the dividend break up in Rs. for the respective years:

                                                                                                                                                                  Total Dividend: INR 11

                                                                                                                                                      Mean Dividend Yield: 9.53%

                                                                                                                                         Variance in Dividend Yield: 50.76

The following table shows the dividend for the respective years and the percentage change in comparison to the previous year’s dividend:

For the year ending March 2016, Noida Toll Bridge Company has declared an equity dividend of 30.00% amounting to Rs 3 per share. At the current share price of Rs 12.05 this result in a dividend yield of 24.9%.

The company has a good dividend track report and has consistently declared dividends for the last 5 years.

 

Financial Overview (in INR Crore)

Indiabulls Ventures Limited

                                                                                                                                                                   Total Dividend: INR 13

                                                                                                                                                    Mean Dividend Yield: 12.37%

                                                                                                                                        Variance in Dividend Yield : 37.02

For the year ending March 2016, Indiabulls Ventures has declared an equity dividend of 149.75% amounting to Rs 2.995 per share. At the current share price of Rs 48.30, this results in a dividend yield of 6.2%.

Indiabulls Ventures had last declared a dividend of 149.75% for the year ending March 2016.

Financial Overview (in INR Crore)

Clariant Chemicals Limited

                                                                                                                                                         Total Dividend: INR 283.31

                                                                                                                                                       Mean Dividend Yield: 7.56%

                                                                                                                                         Variance in Dividend Yield: 35.62

For the year ending March 2016, Clariant Chemicals India has declared an equity dividend of 1500.00% amounting to Rs 150 per share. At the current share price of Rs 673.00, this results in a dividend yield of 22.29%.

The company has a good dividend track report and has consistently declared dividends for the last 5 years.

Financial Overview (in INR Crore)

 

Rural Electrification Corp

                                                                                                                                                           Total Dividend: INR 29.35

                                                                                                                                                       Mean Dividend Yield: 4.24%

                                                                                                                                             Variance in Dividend Yield: 2.13

For the year ending March 2016, Rural Electrification Corporation has declared an equity dividend of 171.00% amounting to Rs 17.1 per share. At the current share price of Rs 168.80, this results in a dividend yield of 10.13%.

The company has a good dividend track report and has consistently declared dividends for the last 5 years.

Financial Overview (in INR Crore)

Power Finance Limited

                                                                                                                                                               Total Dividend: INR 25.4

                                                                                                                                                        Mean Dividend Yield: 4.22%

                                                                                                                                            Variance in Dividend Yield: 5.89

For the year ending March 2016, Power Finance Corporation has declared an equity dividend of 139.00% amounting to Rs 13.9 per share. At the current share price of Rs 145.75, this results in a dividend yield of 9.54%.

The company has a good dividend track report and has consistently declared dividends for the last 5 years.

Financial Overview (in INR Crore)

Hindustan Zinc Limited

                                                                                                                                                            Total Dividend: INR 38.1

                                                                                                                                                     Mean Dividend Yield: 4.17%

                                                                                                                                          Variance in Dividend Yield: 9.63

For the year ending March 2016, Hindustan Zinc has declared an equity dividend of 1390.00% amounting to Rs 27.8 per share. At the current share price of Rs 311.35, this results in a dividend yield of 8.93%.

The company has a good dividend track report and has consistently declared dividends for the last 5 years.

Financial Overview (in INR Crore)

Bajaj Corporation

                                                                                                                                                        Total Dividend: INR 45.08

                                                                                                                                                      Mean Dividend Yield: 2.57%

                                                                                                                                           Variance in Dividend Yield: 2.81

For the year ending March 2016, Bajaj Corp has declared an equity dividend of 1150.00% amounting to Rs 11.5 per share. At the current share price of Rs 379.15, this results in a dividend yield of 3.03%.

Financial Overview (in INR Crore)

Oracle Financial Services

                                                                                                                                                      Total Dividend: INR 799.42

                                                                                                                                                    Mean Dividend Yield: 4.48%

                                                                                                                                        Variance in Dividend Yield: 28.13


For the year ending March 2016, Oracle Financial Services Software has declared an equity dividend of 2000.00% amounting to Rs 100 per share. At the current share price of Rs 3902.25, this results in a dividend yield of 2.56%.

Oracle Financial Services Software had last declared a dividend of 2000.00% for the year ending March 2016.

Financial Overview (in INR Crore)

NMDC Limited

                                                                                                                                                         Total Dividend: INR 44.41

                                                                                                                                                      Mean Dividend Yield: 5.98%

                                                                                                                                            Variance in Dividend Yield: 3.15

For the year ending March 2016, NMDC has declared an equity dividend of 1100.00% amounting to Rs 11 per share. At the current share price of Rs 137.40, this results in a dividend yield of 8.01%.

The company has a good dividend track report and has consistently declared dividends for the last 5 years.

Financial Overview (in INR Crore)

CHART: 1

The following graph shows the average dividend yield of the nine companies that have been considered for the analysis. It also helps track the consistency of the dividends paid by the company with the help of variance.

Data for Chart: 2

The following chart shows the revenue for the companies from 2012 to 2016.

                                                                                                                                                                                   (In INR Crore)


CHART: 2

The following graph shows the median (middle) net profit and revenue earned by the companies along with the average dividend the company has paid. It also denotes the average dividend yield.


The above chart records the percentage change in the revenue in comparison to the previous year.

Data for Chart: 3

Chart 3: Rate of Change in Revenue (Part 1)

Chart 3: Rate of Change in Revenue (Part 2)

Data for Chart: 4


The above table shows the percentage change in the net profits earned by the company in comparison to the previous year’s net profit.

Chart 4: Rate of Change in Net Profit (Part 1)

Chart 4: Rate of Change in Net Profit (Part 2)

Some of the key points to be noted are:

  • Generally, well established large-cap stocks have higher dividend yields. Mid-cap or small-cap growth stocks have a lower dividend yield.
  • Some good companies with high growth rate don’t pay the dividend as they reinvest the entire profit they generate.
  • Dividend yield increases as the stock price falls and vice versa.
  • If you are a conservative investor, i.e., not too keen to take many risks and want a steady cash flow, then it is advisable to invest in the high dividend yield large-cap stocks. Generally, the prices of high dividend yield stocks don’t fluctuate widely with market fluctuations.
  • Usually, companies with high growth rate, reinvest their profits in order to maintain the growth rate. So one cannot expect a high dividend yield from those stocks.

 



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