Top 5 PSU Stocks with Dividend Yield Above 5%

Believe it or not but passive income from dividends has become the lifeblood of many investors.

It's one of the many reasons why investors keep faith in the market.

Even the father of value investing Benjamin Graham agrees when he says,

• The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies.

The assumption is that companies paying out a slice of their earnings to shareholders typically have a record of strong profits. This gives an incentive to the company to maintain the dividend payments in the future.

Keeping that in mind, in today's article, we'll look at the top PSU stocks with dividend yields of over 5%.

The dividend yield is the return from a stock investment solely based on dividends. It is calculated by dividing the dividend per share by the current price of the share in question. The higher the dividend yield, the better.

With that explainer out of the way, let's get started...

Oh and by the way, these stocks are filtered using the Equitymaster's powerful Indian stock screener.

#1 Power Finance Corporation (PFC)

First on the list of high dividend yield PSU stocks is Power Finance Company (PFC).

Despite the steep rally seen in the past few months, PFC commands a dividend yield of over 3%.

In the past one year, PFC share price has gone up by 271%.

The company is paying an interim dividend of Rs 3.5 tomorrow. Before this, it paid out an interim dividend of Rs 4.5 for the current financial year.

And before that in September 2023, PFC had issued bonus shares in the ratio of 1:4. Talk about consistency in rewarding investors!

According to the guidelines on capital restructuring of central public sector enterprises (CPSE), all CPSEs are required to pay a minimum annual dividend of 30% of PAT or 5% of their net worth, whichever is higher, unless an exemption is provided.

Except for FY 2018-19, PFC has been consistently paying dividends since 2007. The median dividend per share of PFC is Rs 7.9. In fact, the average dividend per share in the last 5 years is Rs 8.05.

Note that power financing companies like PFC and IREDA are in demand following India speeding up its renewable energy target. According to IREDA's draft prospectus, around Rs 30 trillion will be required in funding out of which Rs 12 trillion could come from power financing NBFCs.

Additionally, the government's initiation of the Late Payment Surcharge Rule, addressing defaults and delays in payments by distribution companies, ensures the timely settlement of outstanding dues and current bills. This proactive measure is poised to contribute to the well-being of PFC.

The anticipated growth in generation capacity in the coming years presents a favourable landscape for PFC.

#2 Coal India

Next on this list is Coal India.

At the current price of Rs 484, Coal India commands a dividend yield of 5.1%.

In the past one year, Coal India share price has gone up by 122%.

So far for the current financial year, Coal India has already paid two interim dividends of Rs 15.25 and Rs 5.25 in November 2023 and February 2024, respectively.

The company is also expected to declare a final dividend in the coming months.

Note that Coal India has consistently maintained its dividend yield above 5% in the last ten years.

In fact, it is now in the elite class of companies, having yields around 9-10%.

For the financial year 2023, the company's dividend yield was 11.3%. As its share price increased in the last year, the company's current dividend yield is 5.1%.

In the recent past, Coal India has incurred significant capex to reduce its carbon footprint. It plans to invest another Rs 200 billion (bn) in the next few years to set up solar power plants, thermal power plants, and revive fertiliser plants.

It is also investing in increasing its mining and coal-washing capacity and improving rail infrastructure.

Such huge capex can affect the company's free cash flows. Moreover, Coal India, being a cyclical stock, can see huge fluctuations in its earnings if coal prices fluctuate. This can impair the company's dividend-paying capacity.

However, despite the proposed capex, the company will be able to continue its high dividend payout streak.

Until renewable energy has a major share in power generation, coal will continue to dominate.

#3 Balmer Lawrie Investments

Next on the list is Balmer Lawrie Investments.

At the current price of Rs 667 per share, Balmer Lawrie commands a dividend yield of 4.9%.

In the past one year, shares of the company have gained 85%.

The company is yet to declare a dividend for the current financial year. In FY23, Balmer Lawrie paid of Rs 7.5 per share in September 2023.

A relatively unknown PSU, Balmer Lawrie is an NBFC operating in the financial services industry. The company is currently under the control of Ministry of Petroleum & Natural Gas.

Investors usually consider this company as a pure-dividend play as it has rewarded shareholders with big dividends over the years.

Take a look at this...

The company holds over 60% in Balmer Lawrie and receives crores of dividend every year, adding to its strong cash flow.

Over the years, the company has steadily improved its performance and boasts of a respectable ROE and ROCE of 44% and 46%, respectively.

The company recently posted its quarterly earnings which showed improvement across segments.

#4 Power Grid Corporation

Next on this list is Power Grid Corporation.

At the current price of Rs 275 per share, Power Grid Corporation commands a dividend yield of 5.4%.

In the past one year, shares of the company have gone up by 70%.

So far for the current financial year, Power Grid has paid two dividends of Rs 4 and Rs 4.5 each, respectively in November 2023 and February 2024.

Before this, it even rewarded shareholders with bonus shares in September 2023 in the 1:3 ratio.

From humble beginnings in 1989, it has grown to become the largest power transmission company in India.

By carrying electricity through its nationwide grid network, the company acts as a connecting factor between power-generating companies and power-trading companies.

When it comes to getting renewable energy to the home of every Indian, it has a pivotal role to play in the coming decades.

The company also ventured into EV charging infrastructure and is setting up charging stations across the country.

Going forward, the company plans significant investments in expanding the transmission network with a focus on interstate and intrastate projects. This aims to connect renewable energy sources, improve grid stability, and facilitate electricity trading.

To know more, check out Power Grid's dividend payout history.

#5 Gujarat State Fertilizers & Chemicals

Last on this list is Gujarat State Fertilizers & Chemicals (GSFC).

At the current price of Rs 241, the company commands a dividend yield of 4.1%.

In the past one year, shares of the company have surged 84%.

In September 2023, the company paid a final dividend of Rs 10 per share, which was its highest payout.

Note that GSFC is currently planning a massive capex for the next four years, around Rs 40 bn. This should keep the company in healthy stead going forward.

In recent quarters, the company posted its highest ever revenue and the highest fertilizer sales.

The recent Q3 numbers were impacted due to rising input prices and subsidy reduction.

In the past two years, the company has announced several modular-size capex projects including an ammonium sulphate plant, an HX crystal project, a solar power project, and revamping its urea plant at Vadodara to its production capacity.

All the projects will be funded through internal accruals and surplus liquidity which will help the company maintain its debt-free status.

It also plans to set up a green hydrogen plant in its Vadodara plant to support the government's green initiatives.

New product launches and the company's new initiatives in green hydrogen space are expected to drive its revenue in the medium term.

Which Other PSU Stocks Have High Dividend Yields?

Apart from the above, here's a list of other PSU stocks commanding high dividend yields.

PSU Stocks with High Yields

Company	Current Price (Rs)	Dividend Yield (%)
Oil & Natural Gas Corporation Ltd.	274.5	4.1
PTC India Ltd.	195.3	4
Petronet LNG Ltd.	277.6	3.6
Rashtriya Chemicals and Fertilizers Ltd.	149.1	3.6
Oil India Ltd.	573.8	3.5
Balmer Lawrie & Company Ltd.	253.4	3
Chennai Petroleum Corporation Ltd.	951.2	2.8
Gujarat Mineral Development Corporation Ltd.	407.7	2.8
National Aluminium Company Ltd.	162.7	2.8
GAIL (India) Ltd.	182.5	2.7
Rites Ltd.	757.9	2.7
NMDC Ltd.	244.4	2.7
REC Ltd.	473.6	2.7
National Fertilizers Ltd.	105.1	2.7

Data Source: Equitymaster

If you are on the lookout for more such companies, look no further than Equitymaster's Powerful Stock Screener.

Here are some of the popular screens:

• Best Indian Penny Stocks with Dividend Growth
• High Dividend Yield Penny Stocks in India

Conclusion

So there you go... these PSU stocks have consistently maintained above average yields and have a rich dividend history spanning over several years.

If you wish to invest in high dividend yield stocks, think of it this way...

At the current valuations, you're getting a decent stock that not only gives FD like returns but has the potential to provide both capital appreciation as well as increase in dividend payouts in the future.

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...