Top 4 PSU Stocks with Dividend Yield Above 5%

#2 REC

Next on our list is the stock of REC.

The company is a government-backed NBFC focused on financing India's power and infrastructure sectors, including renewables.

It earns primarily through interest on long-term loans and benefits from strong policy support and rising electrification demand. Known for high dividend payouts, REC attracts income investors.

REC Dividend History

Based on the current market price of Rs 324.2, the dividend yield on the stock translates to 5.6%. The company has constantly enhanced dividends over the years.

Moving ahead, the Boards of PFC and REC, at their respective meetings held in February 2026, accorded in-principle approval for restructuring in the form of a merger of PFC and REC.

The merged entity will continue to maintain its status as a Government company and Government of India will continue to retain its control of the merged entity, including the right for appointment/removal of its board members.

The merger structure is under deliberation. Appropriate external agencies will be appointed, including consultants, valuation experts, and legal advisors, to ensure structured, timely, and compliant execution of the merger, subject to applicable regulatory approvals.

Both entities, as NBFCs, comply with the Reserve Bank of India's credit concentration norms applicable to single and group borrower exposures, which are linked to Tier I capital. Currently, both entities operate well within the prescribed exposure limits.

Post-merger, these limits will apply to the consolidated Tier I capital of the merged entity. The merged entity is expected to maintain comfortable capital levels to support future lending growth.

REC future prospects improve meaningfully when the merger with PPC goes through.

The combined entity would become a mega power-sector lender, benefiting from stronger balance sheet strength, lower cost of borrowing, and better risk diversification across projects. This could support higher loan growth, especially in renewables, transmission, and infrastructure financing.

However, the dividend yield may change. Currently, both REC and PFC are high-yield PSUs due to standalone payouts. Post-merger, dividends could be better or lower, depending on the situation.

Investors looking at the stock of REC from a long-term dividend point of view, should take note of the impending merger, which changes the dividend outlook completely.

In the past five trading sessions, REC's shares moved marginally lower from Rs 327.1 to Rs 324.2

The stock touched its 52-week high of Rs 447.25 on 23 April 2025 and a 52-week low of Rs 304.1 on 30 March 2026.

To know more check the REC fact sheet and latest quarterly results.

#3 GAIL (India)

GAIL (India) is India's largest stateowned natural gas company, incorporated in 1984 as a PSU under the Ministry of Petroleum & Natural Gas.

It builds, owns, and operates a vast pipeline network for natural gas and LPG, dominates gas transmission and marketing, runs citygas distribution (PNG and CNG), and has interests in petrochemicals, LNG, exploration, and renewables, including greenhydrogen initiatives.

GAIL (India) Dividend History

Based on the current market price of Rs 141.7, the dividend yield on the stock of Gail India translates to 5.3%. The stock's dividend yield has gone up recently because the stock price has corrected due to geopolitical risks, though dividends too have been enhanced in the last few years.

Moving ahead, GAIL has approved a US$ 64 million (m) investment in its US arm, GAIL Global (USA) Inc., which holds a stake in shale assets in the Eagle Ford Basin. This is not a new acquisition but a capital infusion to reduce debt and stabilise operations.

The company is diversifying beyond natural gas rapidly. GAIL (India) has been offered to set up two fertiliser plants along the MNJPL corridor.

The envisaged investment for these two plants is Rs 210 bn. The set proposal is having an in-principle approval of the board, and the proposal is under evaluation stage now.

GAIL sees renewable energy as a strategic growth opportunity and is expanding its clean energy portfolio of 145 MW - 118 MW of wind and 27 MW of solar.

Several large projects are currently in various stages of development, including 170 MW wind project in Maharashtra, solar projects of 100 MW and 600 MW in Uttar Pradesh, and approximately 35 MW captive use solar plants across various GAIL locations.

Compressed biogas continues to be a strategic pillar of GAIL (India) clean energy portfolio. Following the successful commissioning of 5 ton per day CBG plant at Ranchi, the board has approved investment for establishing 6 CBG plants.

These projects are part of GAIL's commitment to establish around 25-30 CBG plants across India, for which the Company is proactively engaging with the multiple state governments to secure land.

GAIL's prospects are improving with strong push into compressed biogas and renewables. Partnerships and CBG plants enhance clean fuel supply, while plans to scale renewable capacity significantly support long-term growth.

In the past five trading sessions, GAIL's shares moved marginally higher from Rs 140.35 to Rs 141.65.

The stock touched its 52-week high of Rs 202.65 on 12 June 2025 and a 52-week low of Rs 134.35 on 30 March 2026.

To know more check the GAIL India fact sheet and latest quarterly results.

#4 Balmer Lawrie & Co

Next on our list is the stock of Balmer Lawrie & Co.

The company is a diversified public sector enterprise, with a presence in multiple segments - greases and lubricants, refinery and oilfield services, travel and vacations, chemicals, industrial packaging etc.

The company's flagship brand, Balmerol, is among the leaders in its segment offering over 250 product grades, including environment friendly, biodegradable and food grade lubricants.

Balmer Lawrie & Company Dividend History

The stock of Balmer Lawrie & Company has a dividend yield of 5.3%. The company has a consistent dividend paying track record.

On the financial front, the total net income of the for the third quarter saw a growth of 2% compared to previous quarter and stood at Rs 6,606 m.

The Profit Before Tax (PBT) increased 5.65% and rose to Rs 692 m compared to Rs 655 m in the previous quarter. Correspondingly, the net profit (PAT) during the quarter increased 4.66% to Rs 507.4 m compared to Rs 484.8 m in the previous quarter.

The company benefits from a diversified business model, strong PSU backing, and a consistent dividend-paying track record. Its logistics and packaging segments provide steady cash flows.

In the past five trading sessions, Balmer Lawrie & Co's shares moved marginally lower from Rs 163.85 to the current market price of Rs 159.5.

The stock touched its 52-week high of Rs 238 on 15 September 2025 and a 52-week low of Rs 148.35 on 30 March 2026.

To know more check the Balmer Lawrie & Co fact sheet and latest quarterly results.

Should You Consider PSU Stocks with High Dividend Yield?

High dividend yields present a double-edged sword for any portfolio.

On the positive side, they offer immediate cash flow and can serve as a defensive cushion during periods of market volatility. These stocks can provide a reliable income stream that compounds significantly over time if reinvested.

However, yield is a mathematical ratio that rises when a stock price falls. If the payout ratio exceeds earnings or is funded by taking on new debt, a dividend cut is likely inevitable.

While the income is attractive, you must weigh the potential for high returns against the risk of permanent capital loss if the business fundamentals are eroding.

To determine if a high yield is a genuine opportunity or a trap, examine the company's payout ratio relative to its free cash flow. Ensure dividends are covered by organic earnings rather than debt. Finally, evaluate the sector's health to confirm the business can sustain payments long-term.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

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...