Time To Look At Dividend Paying Stocks

Interest rates are set to be cut sharply by the Reserve Bank of India sooner or later, as India and the world battles an economic slowdown. While interest rates are falling, stock prices have virtually collapsed in the last few days. What this means is that dividends from stocks have turned more attractive than bank deposit interest rates. This is provided that the companies continue to report good net profits and you expect a pretty decent dividend yield. Take a look at some companies where the dividends and the dividend yields are almost assured.

Indian Oil

Based on the dividend of 2018-19, the stock is offering a dividend yield of near 10 per cent. We are extremely hopeful that in 2020-21, the company will declare an even better dividend, given that crude prices have fallen through the roof. Now, a drop in crude prices tends to benefit a company like Indian Oil, as margins tend to improve. We believe that we could see higher dividends as well going forth.

The business prospects of the company are unlikely to be greatly impacted due to the coronavirus. In fact, the infections have led to a global economic slowdown, which in turn has pushed crude prices lower, which will benefit the company.

A dividend yield of 7 to 8 per cent is highly possible in 2020-21, which should offer better returns than banks. All in all, the business prospects look good and the dividend yield as well, this makes the shares a good buy for their dividend yield.

Coal India

This is another stock that is available at a good dividend yield. The board declared a dividend of Rs 12 per share recently, which on the current market price of Rs 150, takes the dividend yield close to 8 per cent.

Currently, most government owned banks offer an interest rate of just 6 per cent on Fds, which makes the stock of Coal India attractive for its dividends. Also, the downside risk on the stock is very low and the upside potential is higher.

Also, Coal India business prospects are assured as the company is unlikely to be impacted by the uncertainties presently. Most analysts are betting on volumes at the company growing gradually over the next few years, which should benefit it.

We do not anticipate a great deal of downside risk to the stock, given that the dividends will protect any major price erosion.

Disclaimer

The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.

About the author: Sunil Fernandes is the Managing Editor of GoodReturns.in with 25-years of experience. Prior to this, he has worked with frontline newspapers and magazines including Dalal Street Investment Journal, Deccan Herald, Hindustan Times, Oman Economic Review and Gulf Times.