Most government owned companies and high dividend paying companies tend to declare a dividend in the month of Feb and March. There are many companies that would declare dividends in the next 2-3 months. Here are 5 companies that are not only great on dividend yield, but, have strong businesses and have been paying dividends on a consistent basis for many years now.
1. Coal India
For the financial year ending March 31, 2019, Coal India declared a dividend of Rs 13.1 per share. At the current market price of Rs 193.90, the dividend yield is very close to the 7 per cent mark. In fact, bank fixed deposits offer you an interest rate of just 6.5 per cent, which are very much taxable and dividend yields are tax free upto a sum of Rs 10 lakhs. The post tax yields are much better with dividends from Coal India, than bank deposits.
The one assumption that we have to work with is that Coal India would maintain the same dividend as last year. There is no reason to believe that it would not, given that the government may ask PSUs to declare a higher dividend this year.
Like Coal India, ONGC is a government owned enterprise and the country's largest oil and gas exploration company. At the current market price of Rs 118, the dividend yield based on last year's dividend translates to 6 per cent.
Again, if you are in the highest tax bracket and receive bank interest of even 6.5 per cent, your post tax yields would dive below the 4 per cent mark. Stocks like ONGC offer tax free dividends upto Rs 10 lakhs. Apart from this, ONGC is trading at a very low price to earnings ratio and is also trading at a near 52-week low.
This makes the stock very very attractive, when compared to peers.
3. Oil India
Like ONGC, this is another company that is into oil and gas exploration. Based on last year's dividend that amounted to Rs 10.25 per share, the dividend yield on the stock based on the current market price of Rs 139.25, translates to 7.5 per cent.
Again, there is not too much of a visible risk, in the company continuing to maintain dividends. Last year the company declared a dividend in the month of Feb and this year too a dividend in the month of Feb and March is possible.
In fact, expect a steady stream of dividend on a regular basis in the years to come. The stock can be held for a long period as well.
Indian Oil Corporation is the largest Oil Marketing Company in the country. This is another stock that has slumped to a new 52-week low. Based on last year's dividend of Rs 9.25 per share, the dividend on the stock works to 8.05 per cent.
When compared to the other three stocks mentioned above, the dividends from oil marketing companies can be a lot more uncertain. Therefore, we wish to emphasize that there is no certainty that last year's dividends maybe maintained.
Margins of oil marketing companies like IOC, HPCL and BPCL, can be a lot more uncertain. However, the one advantage of these stocks is that the stock are trading at almost 52-week lows.
Rural Electrification is another government owned enterprise. For the FY 2018-19, the company declared a dividend of Rs 11 per share, which takes the dividend yield on the stock to 8.50 per cent at the current market price.
This again is a government owned entity, which tends to declare very good dividends. This is a finance company that fund's the power infrastructure business in India. For the last many years, the company has been declaring a good dividend and we do not expect any disruption in the same. Again, this company tends to declare dividends in the month of Feb and March.
It's important to keep in mind that dividends are not taxable in the hands of investors upto a sum of Rs 10 lakhs. The stocks mentioned above, are based on their dividends of the last year and there is no guarantee that the same levels of dividends would be declared. However, we do anticipate that companies like ONGC, REC and Coal India would not cut their dividends.