21 Highest Dividend Paying Stocks In India 2024 (2024)

Dividend can be considered to be an important factor as investors view it as a source of income from investing. It is a driving factor for new investors and a few years ago, when the stock market was not very technology driven, it was among the top factors amateur investors kept in mind before investing. With the advancement in technology and data-driven investors, this psyche has changed.

Nevertheless, dividends continue to be an important factor for investing in stocks. Here’s a list of all the companies that have announced their dividends in the year 2024 and are known for giving good dividends.

List of Highest Dividend Paying Stocks In India 2024

Why Invest in the High Dividend Paying Stocks?

Investing in high dividend-paying stocks can be advantageous for several reasons:

Income Generation: High dividend-paying stocks provide a steady stream of income for investors. These dividends can be especially attractive for retirees or those seeking additional income from their investments.

Potential for Growth: While dividend stocks typically belong to established, mature companies, many of these companies still have room for growth. By investing in these companies, investors can benefit from both dividends and potential capital appreciation over time.

Portfolio Stability: Dividend-paying stocks tend to be less volatile than non-dividend-paying stocks. The consistent income they provide can help cushion against market downturns and stabilize a portfolio’s overall performance.

Historical Performance: Historically, dividend-paying stocks have outperformed non-dividend-paying stocks over the long term. Reinvesting dividends can compound returns over time, leading to significant wealth accumulation.

Inflation Hedge: Dividends have the potential to keep pace with inflation, providing investors with a hedge against rising prices. While dividends may not always increase at the same rate as inflation, they often provide better protection than fixed-income investments like bonds.

Signal of Financial Health: Companies that consistently pay dividends signal to investors that they have stable earnings and cash flow. This can be indicative of a strong and healthy business, which may provide reassurance to investors.

Tax Advantages: In some jurisdictions, dividends may be taxed at a lower rate than interest income, providing tax advantages for investors.

How To Choose Highest Dividend Paying Stocks?

Choosing high dividend yield stocks requires a combination of research, analysis, and consideration of various factors. Here are some steps to help you select high dividend yield stocks:

Screening for High Dividend Yields: Use stock screening tools or financial websites to filter stocks based on their dividend yield. Typically, stocks with dividend yields higher than the market average are considered high dividend yield stocks. However, it’s essential to ensure that the high yield is sustainable and not a result of a recent stock price decline.

Evaluate Dividend Sustainability: Look for companies with a track record of consistent dividend payments and sustainable earnings and cash flow. Analyze key financial metrics such as dividend payout ratio (the proportion of earnings paid out as dividends), free cash flow, and earnings growth to assess whether the company can maintain its dividend payments in the future.

Assess Dividend Growth Potential: While high current dividend yield is essential, also consider the potential for future dividend growth. Look for companies with a history of increasing dividends over time, as this indicates strong financial health and management confidence in the company’s future prospects.

Examine the Company’s Financial Health: Evaluate the company’s balance sheet, income statement, and cash flow statement to assess its overall financial health. Look for indicators such as low debt levels, stable revenue and earnings growth, and positive free cash flow generation.

Consider Industry and Market Trends: Assess the company’s industry dynamics and broader market trends to understand its growth potential and risks. Some industries may be more conducive to high dividend payments due to their stable cash flows and mature nature.

Evaluate Competitive Positioning: Analyze the company’s competitive positioning within its industry and its ability to maintain market share and pricing power over time. Companies with durable competitive advantages (such as strong brands, patents, or unique technology) are more likely to sustain high dividend payments.

Diversification: As with any investment strategy, diversification is key to managing risk. Consider building a diversified portfolio of high dividend yield stocks across different sectors and industries to spread risk and enhance long-term returns.

Stay Informed and Monitor Performance: Continuously monitor your high dividend yield stocks and stay informed about any changes in the company’s fundamentals, industry dynamics, or economic conditions that could impact their dividend payments or stock performance.

By following these steps and conducting thorough research, you can identify high dividend yield stocks that align with your investment objectives and risk tolerance.

How Does Taxation of Dividends Work in India?

Dividends are payments made by a company to its shareholders from its profits. They are a way of rewarding investors for holding shares of the company. Dividends can be paid in cash or in the form of additional shares.

But how are dividends taxed in India? The answer depends on the type of dividend and the holding period of the shares. We will explain the difference between qualified and ordinary dividends, and how they are taxed in India.

Qualified dividend

A qualified dividend is a dividend that meets certain conditions to be eligible for a lower tax rate. These conditions are:

• The dividend must be paid by an Indian company or a foreign company that is listed on an Indian stock exchange.
• The dividend must be declared, distributed or paid by the company on or after April 1, 2020.
• The shareholder must hold the shares for more than 12 months before the record date (the date on which the company determines who is eligible to receive the dividend).

Taxation of qualified dividend

A qualified dividend is taxed at a flat rate of 10% (plus surcharge and cess) under Section 115BBD of the Income Tax Act, 1961. This tax is deducted at source by the company before paying the dividend to the shareholder. The shareholder does not have to pay any additional tax on the dividend income.

However, if the total dividend income received by the shareholder in a financial year exceeds INR 10 lakh, then he/she has to pay an additional tax of 10% (plus surcharge and cess) under Section 115BBDA of the Income Tax Act, 1961. This tax has to be paid by the shareholder while filing his/her income tax return.

Tax on long-term capital gain (LTCG)

If the shareholder sells his/her shares after holding them for more than 12 months, then he/she has to pay a tax on the long-term capital gain (LTCG) arising from the sale. The LTCG is taxed at a flat rate of 10% (plus surcharge and cess) under Section 112A of the Income Tax Act, 1961, if it exceeds Rs. 1 lakh in a financial year. The shareholder can claim the benefit of indexation (adjustment for inflation) while computing the LTCG.

Ordinary dividend

An ordinary dividend is a dividend that does not meet the conditions to be a qualified dividend. For example, a dividend paid by a foreign company that is not listed on an Indian stock exchange, or a dividend paid by an Indian company before April 1, 2020, or a dividend received by a shareholder who has held the shares for less than 12 months before the record date.

Taxation of ordinary dividend

An ordinary dividend is taxed at the normal slab rates applicable to the shareholder’s income under Section 56(2)(i) of the Income Tax Act, 1961. The company does not deduct any tax at source from the dividend payment. The shareholder has to report the dividend income in his/her income tax return and pay tax accordingly.

However, if the total dividend income received by the shareholder in a financial year exceeds Rs. 5,000, then he/she has to pay a tax deducted at source (TDS) of 10% (plus surcharge and cess) under Section 194 of the Income Tax Act, 1961. The TDS can be claimed as a credit by the shareholder while filing his/her income tax return.

Factors To Consider Before Investing In Dividend Paying Stocks

One has to consider the following things before investing in dividend-paying stocks:

May not show immense growth

If an investor is looking for immense growth then dividend stocks may not be the best option, rather some of the companies which have grown multiple-folds do not even give dividends.

For people interested in a stable income

These stocks are for those who want a stable income and want to invest in companies for a longer period of time, as these companies in most cases are stable companies that have reached a certain level of saturation for some time.

Setting goals

The most important thing is to set goals for your annual returns, the selection of stocks is of great importance. One has to invest in stocks that at least give an annual growth between 5% to 15% with dividends. This will be a steady approach for an investor.