The dividend yield is a key financial ratio that investors use to assess returns. It shows a company’s annual dividend payments relative to its share price. Typically, a dividend yield of two to five percent is seen as attractive, but market conditions should also be considered. When buying stocks, investors look at various important factors, with dividend yield being one of them. It gives investors an idea of the returns they’re getting from their stock investments.

The Top 10 Dividend Yielded Stocks.

No	Name of the Stock	Dividend yield	Market Capitalization
1	COAL INDIA	4.99%	₹3,02,528 Cr
2	Vedanta (VEDL)	4.73%	₹1,69,950 Cr
3	IOCL	4.66%	₹2,40, 484 Cr
4	GNFC	4.50%	₹10,052 Cr
5	POWERGRID	3.53%	₹3,16,034 Cr
6	ONGC	3.52%	₹3,69,416 Cr
7	HCL Tech	3.40%	₹4,04,661Cr
8	ITC	3.03%	₹5,60,269 Cr
9	GESHIP	2.60%	₹19,144 Cr
10	UTI AMC	2.10%	₹13,283 Cr

1. COAL INDIA

• High Profitability: Strong Return on Equity (ROE) averaging 48.44% and currently at 40.6%.
• Robust Growth: Net Sales growing at 8.18% annually, Operating Profit at an impressive 40.60%.
• Conservative Financing: Low debt-to-equity ratio (0 times).
• High Dividend Yield: 5% dividend yield, attractive for income investors.
• Market Leader: Largest company in its sector, with a market cap of Rs 3,03,915 crore (67.16% of the industry).
• Dominant Sales: Annual sales of Rs 1,42,323.98 represent 81.51% of the industry’s total sales.
• Fair Valuation: Price-to-book value of 3.7, considered fair given the ROE, but trading at a premium to historical valuations.
• Strong Recent Returns: 110.66% return over the past year, outpacing profit growth (13.8%).
• Bullish Technical Indicators: MACD, Bollinger Band, and KST indicators all point to a positive outlook.
• High Institutional Ownership: 31.76% institutional holdings, indicating strong confidence from sophisticated investors.
• Consistent Returns: Track record of stable performance over the last 3 years.

2. Vedanta (VEDL)

• Efficient Capital Use: High Return on Capital Employed (ROCE) of 25.51% (and currently 27.7%), showing effective profit generation from invested capital. Strong Debt Servicing: Low EBITDA ratio of 0.84 times indicates a good ability to meet debt obligations.
• Bullish Technicals: Stock technically in a bullish range, with improving trend and strong signals from MACD, Bollinger Band, and KST.
• High Recent Returns: 65.84% return over the past year.
• Disconnect from Fundamentals: Profits have fallen significantly (-84.3%) despite the strong stock performance, highlighting a potential disconnect between price and underlying financial health.
• Fair Valuation: ROCE of 27.7% and Enterprise Value to Capital Employed ratio of 2.6 suggest fair valuation.
• Discount to Historical Valuation: Stock currently trades at a discount compared to its average historical valuations.
• Attractive Dividend Yield: 4.7% dividend yield provides income potential.

3.Indian Oil Corporation Ltd (IOCL)

• Healthy Long-Term Operating Profit Growth: 19.70% annual growth in operating profit over the long term.
• Bullish Technicals: Stock in a bullish range, with improving trend and positive signals from MACD, Bollinger Band, KST, and OBV4.
• Strong Recent Returns: 73.00% return over the past year.
• Profits : Profits have increased by 326.2% overall.
• High Dividend Yield: 4.75% dividend yield.
• High Institutional Ownership: 38.31% institutional holdings, suggesting confidence from sophisticated investors.

4. Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC)

• Low Debt-to-Equity: 0.03 times, indicating a strong financial position.
• Strong Long-Term Operating Profit Growth: 27.02% annual growth.
• Mildly Bullish Trend: Stock exhibiting a mildly bullish trend.
• Bullish Technical Indicators: MACD and KST suggest positive outlook.
• Expensive Valuation: ROE of 6 and Price-to-Book of 1.2, above historical averages.
• Decent Recent Return: 14.86% return over the past year.
• Significant Profit Decline (Year-over-Year): -66.2% profit drop, highlighting a major disconnect between stock performance and financial health.
• High Dividend Yield: 4.5%, attractive to income investors.
• High Institutional Ownership: 28.7%, with a 1.01% increase in the last quarter, indicating continued confidence from institutional investors.

5. Power Grid Corporation of India (POWRGRID)

• Weak Debt Servicing: High EBITDA ratio of 3.68 times indicates a low ability to service debt. This is a significant concern.
• Healthy Long-Term Growth: Net sales growing at 5.51% annually, operating profit at 14.92%.
• Bullish Technicals: Stock in a bullish range, with improving trend and strong signals from MACD, Bollinger Band, and KST.
• Strong Recent Return: 81.06% return over the past year.
• Discount to Historical Valuation: Stock trades at a discount compared to its average historical valuations. This is less relevant given the current poor performance.
• Extremely High PEG Ratio: 20.4, indicating that the stock price is significantly overvalued relative to its growth potential. This is a major red flag.
• High Dividend Yield: 3.5%.
• High Institutional Ownership: 45.1%, suggesting continued confidence from sophisticated investors.

6. Oil and Natural Gas Corporation (ONGC)

• Low Debt-to-Equity: 0.46 times, indicating a healthy financial position.
• Second Largest in Sector: Market capitalization of Rs 3,74,200 crore, representing 11.98% of the industry.
• Significant Sales: Annual sales of Rs 643,037.01, accounting for 18.92% of industry sales.
• Outperforming Benchmark: Stock has outperformed its industry benchmark for the last three years.
• Bullish Technicals: Stock in a bullish range, with improving trend and positive signals from MACD, Bollinger Band, KST, and OBV.
• Strong Recent Return: 80.06% return over the past year.
• Profit Growth: 14.4% profit increase over the past year.
• Low PEG Ratio: 0.5, suggesting the stock price is undervalued relative to its growth.
• Attractive Valuation: ROCE of 16.4 and Enterprise Value to Capital Employed ratio of 1.1 indicate a good valuation.
• Discount to Historical Valuation: Stock trades at a discount compared to its average historical valuations.
• High Dividend Yield: 3.5%.
• High Institutional Ownership: 38.06%, indicating confidence from institutional investors.
• Consistent Returns: Track record of strong performance over the last three years.

7. HCL Technology

• Strong ROE: Average ROE of 21.83% indicates effective use of shareholder equity.
• Healthy Sales Growth: 12.71% annual growth in net sales.
• Mildly Bullish Technicals: Stock in a mildly bullish range, with improving trend and positive signals from MACD, Bollinger Band, and KST.
• Recent Return: 33.34% return over the past year.
• Profit Growth: 5.7% profit increase over the past year.
• Fair Valuation (ROE-Based): ROE of 23 contributes to a fair valuation.
• Reasonable Price-to-Book: 6.1 Price to Book Value suggests a reasonable valuation relative to book value.
• Premium to Historical Valuation: Stock trading at a premium compared to its average historical valuations.
• Relatively High PEG Ratio: 4.6, suggesting potential overvaluation relative to future growth.
• High Institutional Ownership: 34.64%, indicating confidence from institutional investors.

8. ITC

• Strong and Consistent ROE: Average ROE of 23.77% indicates robust long-term fundamental strength.
• Healthy Sales Growth: 7.35% annual growth in net sales.
• Low Debt-to-Equity: 0 times, a positive indicator of financial health.
• Mildly Bullish Technicals: Stock in a mildly bullish range, though the technical trend recently improved from sideways, generating a small negative return (-1.02%) since then.
• Positive Technical Indicators: MACD, Bollinger Band, and KST are bullish.
• Expensive Valuation: ROE of 27.5 and Price-to-Book value of 7.6 suggest the stock is trading at a premium compared to historical valuations.
• Significant Underperformance: Stock returned -3.79% over the past year, while the overall market (BSE 500) returned 37.15%. This is a major red flag.
• Modest Profit Growth: 6.9% profit increase over the past year.
• Relatively High PEG Ratio: 4.3, suggesting potential overvaluation relative to future growth.
• Very High Institutional Holdings: 84.75%, reflecting strong confidence from institutional investors.

9. Great Eastern Shipping Company Ltd (GESHIP)

• Low Debt-to-Equity: 0.08 times, indicating a stable financial position.
• Impressive Operating Profit Growth: 48.61% annual growth.
• Positive Recent Results: Reported positive results in March 2024 after two negative quarters.
• Strong Interest Coverage: Operating Profit to Interest (Quarterly) ratio of 16.01 times.
• Significant PBT Growth: Profit Before Tax Less Other Income (Quarterly) reached Rs 712.67 crore, a 48.4% increase.
• Record Net Sales: Highest net sales (Quarterly) of Rs 1,497.33 crore.
• Bullish Technicals: Stock in a bullish range, with improving trend and strong signals from MACD, Bollinger Band, KST, DOW, and OBV.
• Strong Recent Return: 7.86% return since the technical trend improved.
• High Institutional Holdings: 44.03%, with a 0.87% increase in the last quarter, indicating strong confidence.
• Consistent Returns & Outperformance: Consistent returns over the last three years and outperformed its industry benchmark.
• Excellent One-Year Return: 76.06% return over the past year.

10. UTI ASSET MANAGEMENT (UTIAMC)

• Strong ROE: Average ROE of 13.78% indicates good long-term fundamental strength.
• Consistent Positive Results: Positive results reported for the last four consecutive quarters.
• Significant PAT Growth: Half-year (HY) PAT of Rs 348.46 crore, up 138.44%.
• Strong Sales Growth: Half-year (HY) net sales of Rs 865.13 crore, up 45.20%.
• Bullish Technicals: Stock in a bullish range, with improving trend and strong signals from MACD, Bollinger Band, KST, and OBV.
• Strong Recent Return: 12.93% return since the technical trend improved.
• Fair Valuation: ROE of 17.4 and Price to Book Value of 3 suggest a fair valuation.
• Stock at Fair Value: Trading at a fair value compared to its average historical valuations.
• Substantial One-Year Return: 31.35% return over the past year.
• Significant Profit Growth: 74.8% profit increase over the past year.
• Low PEG Ratio: 0.2, indicating a very favorable investment opportunity.
• Very High Institutional Holdings: 66.89%, suggesting strong confidence from sophisticated investors.

Frequently Asked Questions (FAQs)

What dividend yield ratio is considered to be ideal?

The Dividend Yield Ratio must be between two to five percentage.

What is the Dividend yield ratio?

This ratio determines how much dividend a company pays to its shareholders to its stock price per year.

What is the formula for the Dividend Yield Ratio?

The formula is the ratio of Annual Dividends Per Share to Market Price per share.

Which law and section in states about the declaration of dividends in India?

Section 123 of the Companies Act, 2013 in India states about the declaration of dividends in India.

Why should a company pay dividends to its shareholders?

To reward the company’s shareholders and to help maximise their wealth to the value invested by a shareholder in a company.

Is there any law that governs if the company does not have sufficient profits then from where it’s supposed to pay dividends in India?

Yes, Rule 3 in the Companies (Declaration and Payment of Dividend) Rules, 2014 says in such cases dividends have to be paid out of the Reserves made by the company.

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