Often there are various criterions based on which investors select stocks such as those with low debt, high growth potential and likewise there are stocks that provide a high dividend yield.
Among various investors, Geraldine Weise who authored The Dividend Connection also suggest the investment strategy that promotes or looks closely at a dividend's yield in determining value.
Dividend yield typically is the dividend declared for a financial year divided by the stock's market price. Companies with high dividend yield normally do not keep a substantial portion of profits as retained earnings. Their stocks are called income stocks.
Now considering the strategy if you also are tempted to invest in high dividend yield stocks, here we summarise all from the PSU space:
1. PNB Gilts
Considering the last market price of Rs. 51.15 per share and dividend declared of Rs. 3 and Rs. 4 for the financial year 21, the scrip offers the highest dividend yield of 13.7 percent. The company's market capitalization stood at Rs. 929 crore.
Rural electrification company for the FY 21 has declared dividend of Rs. 5 and Rs. 6 as interim dividend. So, the yield given the current price of Rs. 128.75 comes out to be 8.5 percent.
3. Power Finance Corporation:
The PSU sector lending company on March 19 declared an interim dividend of Rs. 8. Considering the last market price of Rs. 108.5, the dividend yield of the concern comes out to be 7.37 percent. The company has a good dividend track report and has consistently declared dividends for the last 5 years.
4. Balmer Lawrie Investment:
For the financial year ending FY20, the company declared a dividend of Rs. 35 per share and given the current price of Rs. 456.7 per share, it translates to a dividend yield of 7.6%. This scrip also has a good dividend track record history.
5 Coal India
The dividend declared for the FY 21 has been Rs. 12.5 and considering the current market price of Rs. 128.95, the dividend yield comes to be 9.6 percent. The company has a good dividend paying record.
Taxation of Dividend Stocks In India
With effect from FY21, dividend is taxable in the hands of the shareholders and not in the hands of the company or mutual funds. Also, domestic companies and mutual funds are liable to withhold tax at 10 percent on dividend income paid to resident individuals in excess of Rs. 5000. But this rate amid the pandemic was reduced to 7.5% until March 31, 2021.