Dividends are a great source of income, because they are tax free and also help individuals, especially those who are retired. The Sensex has fallen almost 1000 points from recent highs making some stocks attractive ahead of the dividend season.
Most companies are likely to announce their dividends in the next 2-months. Here are some stocks that look attractive from a dividend perspective. We are not recommending these stocks based on fundamentals. They look attractive based on past dividends and one cannot be sure the same dividend will be maintained.
Coal India has recently declared a dividend of Rs 27 per share. Therefore, it is unlikely to declare a dividend any time soon.
But, if you hold the stock for another 10-months or so, you are likely dividend yield would be 7.5 per cent. In fact, the yield would go higher because of the shorter holding period. And remember this is tax free. Coal India is a debt free, cash rich company.
If NMDC maintains its dividend of 855 per cent declared last year, the dividend yield works to near 9 per cent.
This is not a bad bet and is even better than bank deposit rates. There is no tax on dividends, so the post tax yields when compared to bank deposits is simply superb.
It is almost similar to Coal India in the sense that it is cash rich and debt free company.
Noida Toll runs the tollway connecting Noida to Delhi. Last year the company declared a dividend of 20 per cent, which takes the dividend yield to 13 per cent on the current market price of Rs 21.
However, there are worries that traffic may reduce, given the odd-even formula being implemented in Delhi.
We hope the company maintains the same dividend.
LKP Finance is another company that scores very highly when it comes to dividend yield. The company last year paid a dividend 120 per cent, which takes the dividend yield to 16 per cent on the current market price of Rs 74.
Indiabulls Venture seems to beat all of the above, when it comes to dividend yield. The company had declared a dividend of 150 per cent on a price of Rs 16.50, taking the yield close to 18 per cent.
Oil India declared a dividend of 200 per cent last year. If the company maintains the same dividend, the yield is more than 6 per cent. However, one cannot be sure if the same dividend will be maintained given that profits have been impacted as crude oil price has dropped.
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This company has not seen too much of a traction in its share price off late. The dividend yield is great at 7.29 per cent, but one should watch for the share price movement as well.
The price to book is also not very attractive. We are not sure if you should buy the stock only for dividend.
Power Finance Corporation is majority owned by the government of India.
At the current share price of Rs 170, the stock gives a dividend yield of nearly 6 per cent. If the dividend is increased this year, the yield is likely to go up.
The stock is also a good long term pick and can also give capital appreciation.