When new investors enter the stock market, their main aim is to buy a share at a low price and sell it when the price goes higher to make profits. However, what if you do not have to sell the shares and companies pay you to hold their stocks
That’s the central idea behind dividends, which allow investors to make steady returns on their investments without selling them. However, there are numerous factors involved when investing in trending dividend-paying stocks in India.
In this article, you will learn about dividend stocks in India and the upcoming dividend stocks in 2024.
What are dividend-paying stocks?
Dividend-paying stocks are stocks of companies listed on the stock exchanges that distribute a portion of their earned profits to the shareholders. Most dividend-paying stocks are of well-established and financially stable companies that can expand their businesses even after distributing a portion of the profits to the shareholders.
Companies announce their dividends per share, which means shareholders get a predetermined amount for every share they hold. For example, if you have 10 shares and the company has announced Rs. 2 per share, you will get Rs. 20 as a dividend.
Upcoming dividend-paying stocks in 2024
Here are some of the upcoming dividend-paying stocks in 2024:
1. Sanofi India
Sanofi India is a pharmaceutical company that offers a range of healthcare products. It has announced a dividend of Rs. 117 with a record date of May 3, 2024.
2. Infosys
Infosys is a leading IT company in India and has announced a special dividend of Rs. 8 and a final dividend of Rs. 20. The record date is May 31, 2024.
3. ABB India
ABB India is a multinational global technology company that has announced a dividend of Rs. 23.8. The record date is May 4, 2024.
4. ICICI Securities
ICICI Securities is a financial services firm that offers a wide range of services. It has announced a dividend of Rs. 17 with April 26, 2024 as the record date.
5. Elantas Beck
This company operates in the chemical manufacturing segment of the construction industry. It has announced a per share dividend of Rs. 5 with the record date as May 1, 2024.
6. CRISIL
CRISIL is a company that operates in the global analytics industry and rates debt instruments in India. It has announced a dividend of Rs. 7 per share with May 3, 2024, as the record date.
7. Huhtamaki India
The company is a leading provider of decorative labelling and consumer packaging solutions in India. It has announced a dividend of Rs. 5 with the record date of April 24, 2024.
Factors to consider before investing in dividend-paying stocks
Although trending dividend-paying stocks in India can seem attractive, you should invest in dividend stocks in India carefully and after due consideration. Here are some of the factors you should consider before investing in upcoming dividend stocks in 2024:
1. Dividend payout ratio
The dividend payout ratio is the percentage of a company’s total earnings distributed among its shareholders as dividends. For example, if a company earns Rs. 100 crore and distributes Rs. 20 crore as dividends, the dividend payout ratio would be 20%.
2. Dividend yield
The dividend yield compares a company’s annual and total dividend payout with its current stock price. Most experienced investors look for stocks with a dividend yield of 3-4% without it being higher, which indicates potential dividend cuts in the future.
3. Dividend coverage ratio
The dividend coverage ratio depicts the number of times a company can pay dividends to the shareholders using its net income for a specific period. If a company has a high dividend coverage ratio, it may give regular dividends to the shareholders.
How to select the best dividend stocks?
Dividend-paying stocks in India allow investors to earn a steady income on their investments, but selecting them includes numerous factors. These are:
1. Seeking long-term profitability
Companies may have different financial health during different quarters. In one, they may earn significant profits, while in others, they may incur losses. Hence, it is important to identify stocks that can offer long-term profitability, as they have a higher chance of offering regular dividends.
2. Avoiding heavily indebted companies
Almost all companies have debt as they borrow funds to expand their business. However, companies with high amounts of debt have to use a significant portion of their earnings for repayment, leaving lower or no profits to be distributed as dividends. Hence, you should avoid dividend stocks of companies with heavy debt.
3. Checking sector trends
Trending dividend-paying stocks in India follow market trends, such as bearish, bullish, and sector-based trends. These trends heavily affect companies' business operations and, ultimately, their profits. Hence, you should look at market trends before investing in stocks to earn dividends.
4. Dividend yield
Dividend yield is an important factor in analysing upcoming dividend stocks in India. Although a higher dividend yield is always better, it should be balanced. A dividend yield of around 3-4% depicts a higher possibility of dividend payments. However, stocks with higher-than-usual dividend yields are not considered good as they may indicate potential future dividend cuts.
5. The ratio of the earning growth and payout
Before analysing and choosing the trending dividend-paying stocks in India, it is important to look at the company’s ratio of the earning growth and payout. The ratio indicates that the company has enough income to provide good dividends to the shareholders.
6. Consistent dividend history
You should look at the company's historical dividend performance. If the company has announced regular dividends in the past, there are higher chances of regular future dividend payouts.
Conclusion
Companies offer dividends to their shareholders to ensure they do not sell the shares and continue being shareholders. It is also offered as a reward to the shareholders for their continued trust in the company. However, for investors looking to park their capital in such stocks and earn a steady income, it is crucial to analyse various trending dividend-paying stocks in India to ensure they invest in the most suitable ones.
