Top 5 Dividend Stocks Set for a Big Rebound in 2024

In the past one year, several high dividend-paying stocks have taken a hit for various reasons.

With these companies trading at attractive valuations and relatively lower from their 52-week high price, they provide an excellent opportunity for investors seeking dividend income along with potential capital appreciation.

In this article, we'll look at five such dividend stocks that could rebound in 2024.

#1 Indraprastha Gas

First on the list is Indraprastha Gas.

The company is engaged in the business of city gas distribution in Delhi and nearby areas. It sells compressed natural gas and piped natural gas to automobiles for domestic and industrial use.

Being the pioneer in gas distribution, it has a first-mover advantage and enjoys marketing and infrastructure exclusivity in most of the areas it operates.

The company has a rich history of paying dividends. It started paying dividends in 2004 and has consistently increased the payout.

In the last five years, the company's dividend payout ratio averaged 27.6%. Its current dividend yield is 3.1%.

The primary reason behind the steep fall you see in the above chart is due to the announcement made by the Delhi government to switch its commercial vehicles to 100% electric vehicles (EV) in the next five years.

This can affect the future revenue and market share of Indraprastha Gas as it supplies 30% of its gas to commercial vehicles.

To overcome this challenge and stay ahead, IGL is investing around Rs 12 billion (bn) in capex from the financial year 2024 to the financial year 2026 to develop a city gas distribution network in new areas entirely from internal accruals.

Apart from this, it has joined hands with IOC to set up the H-CNG station, the first-of-a-kind project in the country.

It is also planning for backward integration and manufacturing gas meters in-house, and go a step further and offer consulting services to set up city gas distribution projects in India.

With such huge growth plans, the company is all set to grow its revenue and profits in the medium term and most likely witness a rebound in 2024.

To know more, checkout Indraprastha Gas' financial factsheet and latest quarterly results.

#2 UPL

Second on the list is UPL.

UPL is engaged in manufacturing chemicals such as agrochemicals, industrial chemicals, and speciality chemicals.

It also produces and sells field crops and vegetable seeds.

With a presence across 140 nations, UPL is the 5th largest agrochemical company and 4th largest seed manufacturing company in the world.

UPL has been known to pay consistent dividends to its shareholders since 2004. In the last five years, its dividend payout averaged 20.6%, and its current dividend yield is 1.9%.

The company's shares fell by over 25% in the last year due to falling chemicals prices, which affected its revenue growth.

Moreover, the company also has a considerable debt, which is increasing its financial obligations.

However, if we look at its performance over the last five years, the company has delivered good results.

The debt has decreased moderately, and the revenue and net profit have also grown by a CAGR of 19.5% and 22.9%, respectively.

In the last one year, due to destocking by user industries and high chemical prices, the revenue and profit were affected.

Nevertheless, the company is focussing on improving its overall financial performance. It plans to reduce its gross debt by US$ 500 million (m) by March 2024.

It is taking cost reduction initiatives to reduce costs and improve profits.

The company is also introducing new products to diversify its product range and be prepared to cater to the demand in the next financial year.

All this will help the company improve its revenue and net profits in the medium term. Once this happens, the stock is bound to bounce back soon after.

To know more, checkout UPL's financial factsheet and latest quarterly results.

#3 HDFC Bank

Next on the list is HDFC Bank.

HDFC Bank remains one of the top wealth creators in the Indian share market.

A rock-solid balance sheet, close to zero non-performing assets (NPA), and consistent dividends, even during times of distress, has made it an investor's favourite.

However, the private bank's share price has fallen recently to reach its 52-week low.

The primary reason behind the fall is that the merged company's loan-to-deposit ratio (LDR) increased to 110%, and the gross non-performing assets (NPA) also increased to 1.26% from 1.23%.

With the loans increasing at a faster rate than deposits, analysts feel that interest margins will come under pressure.

Being the largest private sector bank in India, HDFC Bank has always been ahead of its competitors in terms of growth.

After the merger, HDFC Bank has a housing loan portfolio under its radar, which will also help build its customer base.

Moreover, through the merger, HDFC Bank will be able to tap the markets which previously remained inaccessible to the bank.

To know more, check out HDFC Bank's financial factsheet and latest quarterly results.

#4 IG Petrochemicals

Fourth on the list is IG Petrochemicals.

The company is engaged in manufacturing chemicals such as phthalic anhydride (PAN), maleic anhydride (MAN), and benzoic acid.

It is the largest low-cost manufacturer of PAN in the world and commands around 50% market share.

IG Petrochemicals has been paying consistent dividends to its shareholders since 2015 with a consistent increase in dividend payout.

In the last five years, the average dividend payout was 15.9%, and the current dividend yield is 2%.

The company's shares fell drastically in September 2023 before bouncing back to a price seen a year ago.

A drop in profit due to higher raw material prices compared to a year ago is the primary reason for the fall.

Being a market leader, it has high growth plans. It is setting up its fifth plant to increase the capacity of PAN from 53,000 tonnes per annum to 275,110 tonnes per annum by the end of the financial year 2024.

This expansion will help the company improve its revenue by capturing demand in downstream industries such as paints, plasticisers, polyvinyl chloride, and unsaturated polyester resins.

It is also considering manufacturing derivatives of PAN, which will help improve profit margins.

To know more, check out I G Petrochemicals' financial factsheet and latest quarterly results.

#5 Sharda Cropchem

Last on the list is Sharda Cropchem.

The company is engaged in the export of agrochemicals and non-agro products such as conveyor belts, rubber belts, dyes, and dye intermediates.

It outsources the manufacturing of its formulations, which gives it cost competitiveness over competitors.

The company has been paying consistent dividends to its shareholders since 2015 and has a five-year average dividend payout of 18.7%.

Following its Q1 results for financial year 2024, the company's revenue and profit fell in the Europe and LATAM regions due to inflation, adverse market conditions, and recession.

Hence, the company's share price also took a beating and fell by almost 18% in the last year.

However, the company's continuous investment in product developments and registrations to build its product pipeline is expected to drive the growth.

It also plans to expand its distribution base, enter new markets, and focus on cost-cutting initiatives to improve its revenue and margins.

Moreover, the growing population and fewer arable acres per capita will drive the demand for its products, leading to the overall growth of the company in the medium term.

To know more, check out Sharda Cropchem's financial factsheet and latest quarterly results.

Financial Snapshot of High Dividend Stocks

Here's a table showing the above companies on various important parameters for easy reference.

	Indraprastha Gas	UPL	HDFC Bank	IG Petrochem	Sharda Cropchem
Revenue Growth (5-year CAGR) (%)	19.5%	19.5%	12.6%	12.5%	15.1%
Net Profit Growth (5-year CAGR) (%)	14.3%	22.9%	15.5%	11.3%	14.2%
Gross Profit Margin (%)	18.2%	19.0%	NA	13.5%	16.3%
Net Profit Margin (%)	12.9%	8.2%	26.9%	8.5%	8.5%
RoE (%)	20.7%	16.4%	16.0%	16.2%	15.3%
RoCE (%)	27.1%	16.2%	NA	20.8%	20.2%
Dividend Payout (5-year avg) (%)	28.0%	21.0%	14.2%	15.9%	18.7%
Current Dividend Yield (%)	3.1%	1.9%	1.3%	2.0%	1.5%
P/E (x)	18.1	17.2	18.4	13.9	41.1
P/Bv (x)	3	1.6	2.5	1.2	1.7

Source: Equitymaster

These companies have a good chance to rebound in 2024. They are fundamentally strong and have high growth prospects.

However, it is important that you do your research and due diligence before considering these companies for investment.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...