Highest Dividend Paying Stocks – When it comes to investing in stock market or mutual funds, investors’ gives preference to capital appreciation over dividend payment. A capital appreciation means rise in the capital investment. On the other hand dividend payout means payment of the profit made by company to the stock holders.
Well, investing money for capital appreciation or dividend payout is matter of choice. Each strategy has its own benefits.
- Capital appreciation leads to capital gain when you sell your stock at higher price.
- Capital appreciation is like making profit once (capital gain)
- Capital gain tax is applicable on the profit earned.
- A prediction of capital appreciation is harder.
- Dividend leads to regular income when you are holding stock for the long term.
- You need not to pay any tax on the dividend income.
- The dividend income is rational and predictable.
For many investor investing money in dividend paying stock make sense as they are looking for generation of regular income source. If you are planning to invest your money in good dividend paying stocks, this post is for you. In this post, I will share useful information about dividend paying stocks including highest dividend paying stocks in India 2019-20.
Dividend Paying Stocks
Dividend Paying stocks are one which pays good dividend. There are three different factors to evaluate good dividend paying stocks.
- Dividend Yield
First factor of selection is dividend yield. Dividend yield is expressed as a percentage of current share price. It is the estimated one year return of an investment in a stock based on the dividend payout. In order to compute dividend yield you need to divide dividend payment to market price per share and calculate percentage.
Dividend Yield = Dividend Amount/Market Price per share x 100
You should select a stock with higher dividend yield.
- Consistent Dividend payout
Apart from dividend yield, you should check at consistency of dividend payout. A stock should be paying dividend payout consistently. It will help if you are long term stock market investor.
- Consistent increase is dividend payout
The third factor is increase in dividend payout. If you can find out a stock with higher dividend yield, consistency in dividend payout as well as rise in payout it will be best. However, it is difficult to find such stock.
How to Find Highest Dividend Paying Stocks?
After understanding concept of dividend, let’s try to find out good and highest dividend paying stocks based on above concept.
- Get latest annual financial statement of the share. Under dividend section you will find dividend payout amount and dividend percentage. Calculate dividend yield.
- Find out last three to four year result and repeat the same exercise. You will get information on consistency of dividend payout.
- Try to find out stock which provide consistent dividend with increase in dividend payout.
E.g Larsen & Toubro is consistently increasing dividend payout in 2017 it was 700% that rose to 800% in 2018 and this year 900% dividend is declared.
7 Highest Dividend Paying Stocks in India 2019-20
Top Divided Paying Stocks in India for 2019-20 are given below.
Things to consider while investing in Dividend Paying Stocks
You need to consider the following factors while investing in Dividend Paying Stocks.
(1) Select Low Debt or Debt-Free Companies
The first thing you should consider before investing in any stock is the debt level. Debt is bad for any company. Many companies pay dividends using debt. You should avoid such stocks. You can easily get information about the debt level from the financial statement of the company.
(2) Know about the sector and company
Another important factor to consider before investing in dividend-paying stock is the business of the company and sector. There are few sectors which are volatile such as insurance, finance. You should understand the risk associated with such sectors and avoid investment.
(3) Consistent Dividend Payout
It is important to select a stock with a consistent dividend payout. There is no point in investing in stock where the company is paying dividends only for one or two years.
Over to you
While you are investing in stock, apart from a high dividend you should look at the various other parameters of the stock. You should scrutinize a company’s annual reports and factor in the consistency of dividend payouts, fundamentals, earnings growth, profits, etc.
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