10 Companies that Could Announce the Biggest Dividends of 2023

It's dividend season on Dalal Street.

Every year by mid-February, after the third quarter results are out of the way, investors look forward to the annual results of the companies in which they hold shares.

This is not only because the annual results are important... they are... but also because of the big dividends these companies pay out.

Most profit making companies pay dividends when they announce their annual results. Some pay it only once a year, at this time. Others pay dividends twice a year. A few pay it thrice a year. And even fewer pay dividends quarterly.

But even in these cases of multiple dividends per year, companies usually pay the biggest dividend at the time of their annual results. Usually the difference between this 'final dividend' as it's called, and the other dividends declared during the year, is significant.

It's no wonder investors keenly anticipate big fat payouts from high dividend payout stocks in India. During AGMs, unsatisfied investors complaining about, 'the low dividend this year', is a common sight.

It's not too much of a stretch to say that the annual or 'final' dividend is a touchy subject for many investors who have grown accustomed to receiving generous payouts year after year.

Why invest in dividend stocks?

Dividend stocks provide stability to portfolios of conservative investors. This increases confidence in these stocks. And this in turn, brings in more money into the market.

This stability of dividend stocks has proven itself to be very tempting to investors. This is especially true in a volatile markets. When most stocks are crashing, these stocks provide investors with a steady income and a moderate return on their investment.

This is not to say dividend stocks don't fall with the rest of the market. Of course they do.

However, many academic studies, not to mention a mountain of anecdotal evidence, has shown that these stocks tend to fall less than the market. They tend to outperform growth stocks during times of negative investor sentiment.

There's another, often ignored, reason to invest in dividend stocks. The requirement to pay out regular dividends to shareholders, provides an incentive for companies to increase their earnings. This is so they can pay an even higher dividend next year.

This is why dividend paying stocks have been shown to deliver higher returns than non-dividend paying stocks over long periods of time. Thus investors are always in search of dividend paying multibagger stocks.

Even the father of value investing Benjamin Graham agrees when he said...

• '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.'

Biggest Dividend Paying Stocks

With the interest in dividend stocks heating up, it's natural for investors to seek out the stocks that will pay the biggest dividends.

By this we mean two things...

First, the companies that pay a significant share of their profits as dividend.

Second, the companies that will see a big jump in profits this year.

When you put the two together, we get a list of stocks that will deliver a big payout (on a per share basis) compared to last year.

This bodes well for investors in volatile markets as stocks with a big jump in dividend will be in a comparatively better placed to ride out the market's swings.

In this editorial, we present 10 stocks that have the following characteristics.

• A strong dividend paying track record.
• Moderate to high dividend payout ratio.
• Growth in profits i.e. earnings per share (EPS), in FY2023.

Thus, we expect these stocks to pay out a hefty final dividend at the time of their annual results a few months from now.

Please note these are not recommendations. Investors looking for big dividends in 2023 can consider adding the following stocks to their watchlist.

• Britannia Industries

  This FMCG bluechip is on a roll.

  If you were to even casually glance at the company's last five years' performance, you might think it had a magical defence against covid. It was hardly affected.

  During the FY18-22 period, the company's sales went up over 40% and net profit went up over 50%.

  And this was without a single year of declining sales or profits. This speaks volumes of the quality of the management and the strength of the company's brands.

  The company has been able to pass on rising input costs due to inflation to customers. This explains the company's high return ratios, stable margins, and strong cash flows. The cherry on the cake is the low debt on the balance sheet.

  Thus, shareholders can expect the high dividend payout to continue.

  In FY22 it paid a dividend of Rs 56.5. Its dividend payout ratio was 85%. The company's profits for the first 9 months of FY23 has already crossed the full year profits of FY22. Thus, it's all set to increase the dividend per share significantly this year.

  You can read the company's fact sheet here.

• Hindustan Aeronautics

  The company has been delivering consistent growth in revenues and profits over the years. It's a debt free firm with strong cash flows.

  It's position as the pre-eminent aeronautical development firm in India will remain unchallenged for years to come. It's among the best defence stocks in India.

  During the FY18-22 period, the company's sales and profits have grown by 34% and 155% respectively.

  The company has a solid order book and good execution abilities. The management also maintains a tight control over costs. It's no surprise that the return ratios and cash flows are strong.

  The company has been paying out about 30% of its profits as dividend each year. In FY22, it paid Rs 50 per share.

  This year is shaping up well for the company going by the 9 months FY23 performance. Investors can expect a hefty payout in FY23 as well.

  You can read the company's fact sheet here.

• Dr. Reddy's Lab

  The pharma major has been a consistent performer over the years. This year will be no different.

  In fact, FY23 will go down as one of the best years in the company's history in terms of profitability.

  The net profit for the year should be around double the figure of last year. Sales growth too has been strong.

  The company's margins, return ratios, cash flows have all been strong historically. And the company is set to deliver yet another solid performance for the year FY23. It's no doubt among the best pharma stocks in India.

  The company has also been a consistent dividend payer. In FY22 it paid out 30% of its profits as dividend, Rs 30 per share, a significant increase over the previous year.

  This year, even if we assume no change in the payout ratio, shareholders can expect a big jump in the per share dividend. This will be due to the expected massive jump in the net profit this year over last year.

  You can read the company's fact sheet here.

• Tata Elxsi

  The stock may have taken a hit since mid-2022 but the company's fundamentals remain as strong as ever. The growth story too is intact.

  Thus shareholders can expect the company to deliver steady profit growth in the years ahead. It's one of the best AI stocks in India.

  The topline growth is not a concern as the company has the EV megatrend as a tailwind working in its favour. It also has the support of the Tata group.

  The strength of the company's fundamentals, of course, is not in question. Thus, it's dividend paying capacity, well into the future, is also assured.

  The company paid out about half of its profit as dividend in FY22, Rs 42.5 per share. The company is on track to deliver a net profit growth of at least 25%, perhaps even 30%. Thus, the per share dividend amount should also growth by a similar percentage.

  You can read the company's fact sheet here.

• Persistent Systems

  This stock has been one of the stars in the midcap IT space and for good reason. It has almost everything going for it.

  A strong growth story, excellent financials, good management, zero debt, and a reliable dividend payout. What more could investors ask for?

  Last year, the company paid about 35% of its profits as dividend, Rs 31 per share. The dividend payout has been growing steadily over the years, a good sign.

  This year the company's net profit could grow by 25-30%. Thus, assuming the payout stays the same, shareholders can expect a similar increase in the per share dividend.

  You can read the company's fact sheet here.

• Coforge

  The third IT company on this list has been a steady dividend payer over the years. Even during bad times the company has maintained a good payout.

  Last year, Coforge paid about half of its profits as dividend, Rs 52 per share. The company's financials are strong, and growth has been good this year.

  Based on the 9 months FY23 performance, the company has a good chance of delivering a 25% growth in both topline and bottomline.

  Thus, shareholders can expect a similar increase in the per share dividend amount.

  You can read the company's fact sheet here.

• Cera Sanitaryware

  This company has been one of the biggest growth stocks on the market.

  Its growth has slowed recently due to the fact that it's no longer a smallcap. But the growth numbers are still impressive as are the rest of the company's financials, including the dividend payouts.

  Its long term growth story will remain in place for a very long time. Thus investors can be assured of a decent dividend payout for many years.

  Last year, the company paid about 30% of its profits a dividend, Rs 35 per share. This year the company is on track to deliver a stellar earnings growth in excess of 25%.

  Thus, shareholders can expect a hefty payout.

  You can read the company's fact sheet here.

• VST Industries

  As a cigarette maker, it won't find itself on any ESG list but for investors looking for steady dividends, you can't really go wrong with this stock.

  It has one of the best track records of dividend payments in the Indian stock market, both in terms of consistency and amount.

  In the last five years, the company has averaged a payout ratio of a little over 61% which is very impressive. Last year's payout was 67.5% of net profit, Rs 140 per share.

  This is not a high growth stock but investors can expect about a 10% earnings growth this year and thus, a similar increase in per share dividend.

  You can read the company's fact sheet here.

• Oil India

  It's a fully integrated oil and natural gas company engaged in exploring, developing, producing and transporting crude oil, natural gas, and liquified petroleum gas (LPG). The company also produces electricity through solar, wind, and green hydrogen sources.

  In the last five years, its revenue has grown at a compound annual growth rate (CAGR) of 14%, owing to steady volume growth. The profits also grew at a CAGR of 28% during the same time.

  As a result, the company boasts of increasing margins, strong cashflows, and high return ratios.

  Coming to the company's dividends, it has paid dividends consistently and has declared thirty-two dividends in the last thirteen years.

  So far for 2023, the company has declared two interim dividends totalling to Rs 14.5 per share, which is already higher than previous year's dividend payout.

  In the first nine months of the financial year 2023, the company's revenue and profits have already crossed the previous year's numbers. This indicates a possibility of a higher dividend in 2023.

  You can read the company's fact sheet here.

• Hawkins Cookers

  The last stock on this list is one of the best dividend stocks in the Indian market. The company's payout ratio is among the highest in the stock market.

  The management of this home appliances firm is highly regarded for rewarding shareholders with generous dividends every year.

  In fact, barring the covid year in which the company didn't pay a dividend, the last five years' average payout is 75%. Including the covid year, it's 60%. Last year, the company paid about 95% of its net profit as dividend, Rs 150 per share. Those are all very high numbers.

  There are very few companies in the Indian stock market with strong fundamentals, steady growth, low debt, and a consistently high dividend payout ratio. This is one of them.

  This year, the company is likely to deliver 10% earnings growth. Shareholders can expect a similar increase in the per share dividend if the company maintains its high payout.

  You can read the company's fact sheet here.

Conclusion

This was a list of 10 stocks that are likely to pay big dividends at the time of their annual results.

However, these are not recommendations and in any case, dividends should be only one of the many criteria investors need to look at before coming to a decision on any stock.

There are stocks that don't pay dividends but can still be excellent investments.

Investors should do t heir due diligence before taking a position in any stock in the market.

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...