These five stocks trading below ₹200 offer monster dividends

High dividend yield strategies have proven particularly effective in recent times. Over the past five decades, few approaches to investing have been as rewarding as buying and holding dividend stocks. Companies that consistently share a portion of their profits with shareholders typically have strong, recurring profitability and long-term reliability.

We analysed the universe of stocks trading below ₹200 in India, and found these five had the highest dividend yields.

#1 India Grid Trust

India Grid Trust, or IndiGrid, leads the pack with a dividend yield of 9.1%. It is India’s first and largest infrastructure investment trust (InvIT) in the power transmission sector. It manages an extensive portfolio of power transmission networks and renewable energy assets, ensuring reliable power distribution across the country.

The stock was trading at ₹142 as of 28 November. Over the past four years indiGrid has consistently demonstrated its commitment to rewarding unitholders. It has maintained an average dividend yield of 9.2% during this period.

Since its inception on 3 August 2017, India Grid Trust has declared dividends 59 times. In the past 12 months alone, the trust announced a total equity dividend of ₹14.61 per share.

The trust has a robust governance framework, with 50% independent directors and quarterly asset valuations. Major decisions – such as debt above 25% of asset value or significant related transactions – require unitholder approval. than 98% of proposals have been approved in the past 10 meetings.

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Going forward, India Grid Trust plans touse ₹690 crore raised from preferential issues to fund acquisitions and repay debt.

While it has good corporate governance and an excellent dividend track record, investors should review its financials and conduct further research on its governance and management.

#2 Indian Oil Corporation

IOC is the second largest player in the domestic petrochemical market in the country and a key exporter, supplying these products to over 70 countries worldwide. The company owns and operates 11 of India’s 23 refineries with a combined refining capacity of 80.7 MTPA.

Trading at ₹138, the blue-chip stock currently offers a dividend yield of 8.6%. It has a solid track record of rewarding shareholders.

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In FY21 and FY22 it delivered dividend yields of 13% and 10%, respectively, followed by 3.8% in FY23 and 7.2% in FY24. Between 2020 and 2024,the average yield stood at 8.7%.

IOC has a massive pipeline network stretching to over 11,000 km. It has a throughput capacity of 85.5 million tonnes per annum (mtpa) for crude oil and petroleum products.

While the company maintains a strong dividend payout, investors should review its financials and conduct research on its governance and management.

By 2050, IOC plans to generate 200 GW of renewable energy, and produce seven million tonnes of biofuels and nine million tonnes of biogas.

IOC also expects its petrochemical capacity to more than triple by 2030, with new plants being developed at Gujarat and Panipat refineries, and enhanced lube oil base stock (LOBS) capacity at its Haldia complex.

#3 Balmer Lawrie Investments

Balmer Lawrie Investments Limited is a government-owned holding company with shares in its subsidiary Balmer Lawrie & Co.

Currently trading at ₹77, the stock offers a dividend yield of 4.9%. The company has a solid track record of rewarding shareholders with consistent dividend payouts.

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In FY21, Balmer Lawrie Investments had a dividend yield of 12.8%. However, this has decreased in subsequent years. The average dividend yield over the past five years is 8.9%. Since 2003, the company has declared 23 dividends.

In August, the company carried out a stock split in the ratio of 10:1. This means that for every share they held, shareholders would receive 10.

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Going forward, the company may pursue strategic investments or divestitures to align with its growth objectives and optimise its portfolio.

While Balmer Lawrie Investments has strong corporate governance practices and no apparent red flags, investors should conduct their own research.

#4 PTC India

PTC India is regarded as a pioneer in developing power trading in India. Trading at ₹175, the stock has a dividend yield of 4.5%. The company has a strong record on dividend payouts.

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In 2020, it had a huge 14.2% dividend yield, and between 2020 and 2024, it maintained an average yield of 9.3%. PTC India has declared 23 dividends since 2004.

The company has diversified its offerings over the years, and recently entered the wind energy business by setting up a new company, PTC Energy Limited. It is also exploring opportunities in green hydrogen and battery energy storage systems.

In June 2024, the market regulator imposed fines totalling ₹35 lakh on chairman Rajib Kumar Mishra and its former managing director and chief executive officer Pawan Singh for alleged lapses in corporate governance. It also barred Singh from holding being a director or holding a managerial role in any listed company, intermediaries, or any company planning an initial public offering (IPO) in the next two years.

There have been similar incidents in the past as well. While the company maintains a strong dividend payout, these recurring governance issues raise concerns about its management practices.

Going forward, the company expects good traction from its transmission segment, with new projects in the pipeline. It is focussed on increasing fund disbursement and the size of its loan book.

#5 Gujarat Pipavav Port

The company is India’s first private sector port that connects India with the US, Europe, the Middle East, Africa, and the Far East. It handles four types of cargo – container, dry bulk, liquid bulk, and roll-on/roll-off ships.

Trading at ₹185, the stock currently offers a dividend yield of 3.9%. Since its inception in 2016, Gujarat Pipavav Port has declared dividends 18 times.

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From FY20 to FY24, it maintained an average dividend yield of 5.5%.

The company is investing in upgrading its existing liquid berth (a specialised dock or wharf used to handle oil, gas, and other liquid bulk cargo) to handle partially loaded vessels. It is also promoting its dedicated freight corridor among customers, which will help reduce transit time.

While there are no apparent red flags in its governance, investors should conduct their own research.

Conclusion

Investing in high dividend-yield stocks has several benefits, particularly for income-focused investors. These stocks provide a steady income stream, which can be especially appealing to retirees and others seeking consistent cash flows.

Additionally, companies that pay high dividends are often well-established and financially stable, which makes them less volatile than growth stocks.

Dividends can also be reinvested to compound growth over time, and in some cases, dividend income may be taxed at a lower rate than capital gains, providing a tax advantage.

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However, there are some risks to consider as well. A high dividend yield may be a red flag, indicating that the stock price has fallen significantly due to underlying business issues.

A company with a high payout ratio may also find it difficult to maintain these dividends if financial conditions worsen.

High-yield dividend stocks can also be sensitive to interest rate changes, with rising rates potentially making them less attractive compared to bonds.

It is essential to conduct thorough research into a company’s financial health, corporate governance practices, and the sustainability of its dividends before making an investment decision.

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