Dividend-paying PSU stocks: Public sector undertakings (PSUs) have long been known for offering strong dividends to investors, which increases their appeal for retail investors. Apart from offering an additional income in the form of consistent dividends, over the last few years, the PSU stocks have also delivered solid returns, thus offering dual benefits to investors.
The BSE PSU index, an index of PSU stocks, has surged 240% in the last five years amid improving financial performance, government reforms and policy support, and attractive valuations relative to private peers.
What’s better? The dividend offered by the majority of top PSU stocks is either higher than or equivalent to the returns of bank fixed deposits. According to a report by Axis Direct, in the last one year, PSU stocks have delivered a dividend yield of up to 7%. At the same time, SBI fixed deposit rate for FDs for a year ranges from 5.9% to 6.25%.
Additionally, these PSU stocks are priced under ₹500.
What is a dividend yield?
Dividend yield represents the annual dividend income earned by a shareholder as a percentage of a stock’s current market price. It is an important metric for investors who are focused on earning a regular income from their investments.
However, a higher dividend yield does not always indicate strong financial health or long-term stability. While a yield of 5% or more is generally considered attractive, it should always be assessed alongside the company’s fundamentals and the sustainability of earnings.
Highest dividend-paying PSU stocks
According to a report by Axis Direct, a majority of the high dividend-paying PSU stocks belonged to the oil and gas or financial sector.
Leading the board consistently is Coal India, with a dividend yield of 7% in the last one year. Coal India has paid a dividend of ₹26.5 per share in the last one year. It is followed by REC Limited, which offered a dividend yield of 6%, on the back of ₹19.7 dividend paid to investors in the last one year.
Meanwhile, four companies, namely — ONGC, Power Finance Corporation, BPCL and Balmer Lawrie & Co — have a dividend yield of 5%.
In terms of the amount of dividend paid, BPCL leads with a ₹17.5 per share dividend handed out in a year. At the same time, another oil & gas company, ONGC, has paid a ₹12.3 per share dividend. PFC and Balmer Lawrie handed out dividends of ₹16.4 and ₹8.5, respectively.
| Company Name | Industry | Dividend in Past 12 months (Rs) | Dividend Yield (Last 12 months) |
|---|---|---|---|
| Coal India Limited | Metals & Min | 26.5 | 7% |
| REC LIMITED | Financials | 19.7 | 6% |
| Oil And Natural Gas Corporation Ltd | Oil & Gas | 12.3 | 5% |
| Power Finance Corporation Ltd | Financials | 16.4 | 5% |
| Bharat Petroleum Corpn. Ltd. | Oil & Gas | 17.5 | 5% |
| Balmer Lawrie & Co. Ltd. | Others | 8.5 | 5% |
| Gail (India) Ltd. | Oil & Gas | 7.5 | 4% |
| Shipping Corporation Of India Ltd | Transport | 9.6 | 4% |
| NMDC Ltd | Metals & Min | 3.3 | 4% |
| National Aluminium Co. Ltd. | Metals & Min | 10.5 | 4% |
| RITES Limited | Industrials | 7.9 | 3% |
| POWER GRID CORPORATION OF INDIA LIMITED | Utilities | 9 | 3% |
| Hindustan Petroleum Corporation Ltd | Oil & Gas | 15.5 | 3% |
| Union Bank of India | Financials | 4.8 | 3% |
| Oil India Limited | Oil & Gas | 12 | 3% |
| Source: Axis Direct |
GAIL (India), Shipping Corp, NMDC and NALCO are other high dividend-paying PSU stocks, with a yield of 4% each.
At the same time, RITES, Power Grid, HPCL, Union Bank of India and Oil India are the five companies with a dividend yield of 3%. The dividends offered by these companies ranged from ₹4.8 to ₹12.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
