The carnage witnessed in the month of Sept and Oct in stocks, has left some of the most astute investors on the back foot.

Stock selection is becoming increasingly difficult and hence it is best to stick to the safe and secure ones. Here are a few stocks which have a limited downside risk, because of their dividends.

Coal India

The one reason to be betting on this stock is that the shares are trading at Rs 262, which is not very far away from its 52-week low of Rs 255. The downward risk on the stock is minimum given the fact that the dividend yield would tend to protect capital.

We expect Coal India to declare a dividend of Rs 17 per share in Feb, 2019, which should take the yield on the stock to a decent 6.45 per cent. Dividends it maybe noted are tax free in the hands of the investors up to a sum of Rs 10 lakhs.

Coal India is a cash rich dividend paying company. This year, it may even declare a higher dividend than we have forecast, given that the government may push PSUs for higher dividends.

The company's profitability may also see a dramatic improvement in the coming days, given that coal prices are seeing an uptrend. Coal India is a good stock to buy and with volatility increasing in the next few months due to state and central government elections, you may might want to play it a little safe in the coming days. Coal India is a stock that may not see too much of a downside in the coming days.

Recently, the government offered for sale shares of Coal India at a price of Rs 266, as against which the shares are now trading at Rs 262.

Power Finance Corporation

Power Finance Corporation is another stock that is government owned stock, that has limited downside risk, due to its dividends. The company recently also reported a good set of quarterly numbers for the period ending Sept 30, 2018.

Again, like Coal India, expect the company to declare a good dividend of around Rs 6-7 per share in the month of Feb 2019. This should take the dividend yield to around 8 per cent, if one can buy and hold the stock for the next 3-4 months.

Here again, the downside risk for the stock remains very limited, given the dividend yield. Apart from this Power Finance Corporation has reported an EPS of more than Rs 5 for the quarter ending Sept 30, 2018. The one year forward p/e of just 5 times 2018-19 earnings, make the shares a cheap and attractive bet.

The downside risks on the stock are very limited owing to the dividends.