Stocks have been on a roll in 2021. However, analysts caution that similar kind of returns may not be forthcoming in the years to come. It is good to look at stocks that provide a regular dividend yield and a proven track record.
What to look for in dividend paying companies?
The one thing that you must look for is the consistency in paying dividends. For example, there are many companies whose dividend yield for 2020-21 shows a high dividend yield simply because they have paid a one time dividend. A classic example is BPCL, where the company declared a one-off dividend of Rs 58 per share. Look for companies that are consistently providing a dividend yield of at least 4% and more over the last few years. Here are a few companies that provide a good dividend yield.
For the year financial ending March 2021, Bajaj Auto has declared an equity dividend of 140 per share. At the current share price of Rs 3176 this results in a dividend yield of 4.41%. Apart from this, the stock also has the potential to provide capital appreciation as the shares have fallen from levels of Rs 4361 to the current levels of Rs 3175. In fact, the stock is nearer to its 52-week low, which also makes it an attractive buy. Apart from this, the company has been declaring dividend non stop for decades now. Fundamentally too, we have seen bonus shares being issued on a very small equity. The stock is also down 18% in the last 3-months, which means you are getting the stock cheaper.
This is a tobacco to FMCG major and again the stock has been a consistent dividend paying company. For the year ending March 2021, the company has declared an equity dividend of Rs 10.75 per share. At the current share price of Rs 220, this results in a dividend yield of 4.89%.
The problem for ITC is that the stock has been an underperformer for many years now. While the markets as a whole have rallied in the last 2-years from the covid lows, this stock has barely moved.
Despite being an index company, it does not figure in the top 5 holdings of most large cap equity mutual funds. This has led to some sharp under performance of the stock. There are some intermittent rallies, but, the stock than falls right back.
For the year ending March 2021 SJVN declared an equity dividend of Rs 2.2 per share. At the current share price of Rs 29.20 this results in a dividend yield of 7.53%. This company has a consistent track record of paying dividends.
SJVN Limited is a Mini Ratna, and is a government of Indian owned entity. The company implementing or operating power projects in Himachal Pradesh, Uttarakhand, Bihar, Maharashtra, Uttar Pradesh, Punjab, Gujarat and Arunachal Pradesh. Apart from states in India, SJVN is also implementing or operating power plants in neighbouring countries of Nepal and Bhutan.
Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.