Top Dividend Stocks to Consider for 2024 and Beyond

Dividend investing is a popular strategy that many investors find lucrative. However, is it a good strategy to rely on in the long run? Let's try to understand that today.

Instead of receiving a lump sum cash, in dividend investing you receive portions of the same cash flow with a higher opportunity cost.

There are two schools of thoughts on this matter.

One believes that the management is distributing profits to the owners, as the owners have entrusted their money to the management for providing them with adequate returns on the same.

The other school of thought suggests that the management lacks vision for the company and does have confidence on the business to generate sufficient returns on the invested capital.

However, many a times investors tend to have this idea of sitting back and watching the dividend payments hit their investment account.

For those who align with the first school of thought and seek stocks offering reasonable dividends, we have pinpointed five stocks worth considering for your watchlist.

These companies are filtered using Equitymaster's powerful dividend stock screener.

#1 ITC

First on our list is none other than ITC.

ITC is a diversified conglomerate that operates in various sectors including FMCG, hotels, software, packaging, paperboards, and agriculture.

It is the second most valuable FMCG company in India, after Hindustan Unilever Limited (HUL).

The company's share price recently fell due to lower than expected quarterly results.

The company is looking to increase its market share in North India with its YiPPee! Noodles brand, which is currently the second most popular noodle brand in India.

ITC has a healthy dividend payout of 98%, resulting in a dividend yield of 3%.

The 3-year revenue of the company has grown by a CAGR of 13%. While the 3-year net profit of the company has grown by a CAGR of 7%.

This has resulted in healthy return ratios. The company's 3-year (Return on Equity) RoE stands at 25% while its 3-year (Return on Capital Employed) RoCE stands at 33.6%.

ITC's stock is up 2% in the past year, including a 0.8% downfall in the last month.

#2 Tata Consultancy Services Ltd

Second on this list is Tata Consultancy Services Ltd.

Tata Consultancy Services is the flagship company of Tata group.

It is an IT services, consulting and business solutions organization that has been partnering with many of the world's largest businesses in their transformation journeys for over 50 years.

The company serves some of the biggest conglomerates in the world like Google, Amazon, Azure, openstack, Adobe, Intel, Bosch, IBM, Apple, Oracle, Symantec, etc.

TCS has been a generous payer to shareholders and have paid 70% of its cash flows from FY 2005. It has paid about 80% of its cash flows as dividends since FY 2015.

The 3-year revenue of the company has grown by a CAGR of 14%. While the 3-year net profit of the company has grown by a CAGR of 12%.

The company has healthy return ratios. The company's 3-year RoE stands at 47.4% while its 3-year RoCE stands at 59.14%.

TCS has a healthy dividend payout of 66.2%, resulting in a dividend yield of 1.4%.

TCS's stock is up by 19% in the past year. In the last month, it has seen a decline of 3%.

#3 Hindustan Unilever Ltd

Third on the list is Hindustan Unilever Ltd.

Hindustan Unilever (HUL) is in the FMCG business comprising primarily of home care, beauty & personal care and foods & refreshment segments.

The company has manufacturing facilities across the country and sells primarily in India.

The company is the market leader in many product categories such as skin cleansing, skin care, hair care, fabric wash, household care, tea, health food drinks, and ketchup.

It is a market leader in about 90% of its businesses.

The 3-year revenue of the company has grown by a CAGR of 10%. While the 3-year net profit of the company has grown by a CAGR of 8%.

The company has healthy return rations. The 3-year RoE stands at 19.7% while its 3-year RoCE stands at 26.0%.

HUL has a hefty dividend payout of 92.2%, resulting in a dividend yield of 1.8%.

HUL's stock has declined by 6.5% in the past year, including a 4.1% gain in the last month.

#4 Infosys Ltd

Fourth on the list is Infosys Ltd.

Infosys Ltd provides consulting, technology, outsourcing and next-generation digital services to enable clients to execute strategies for their digital transformation.

It is the 2nd largest Information Technology company in India behind TCS.

As present, the company caters to about 185 of the Fortune 500 companies.

Infosys has a healthy dividend payout of 63.3%, resulting in a dividend yield of 3%.

The topline of the company has grown by a 3-year CAGR of 15%. While the 3-year profit after tax of the company has grown by a CAGR of 10%.

This has resulted in healthy return ratios. The company's 3-year RoE stands at 31% while its 3-year RoCE stands at 39.1%.

Infosys' stock is up 13% in the past year, including a 4% decline in the last month.

#5 Bajaj Finance Ltd

Fifth on our list is Bajaj Finance Ltd (BFL).

Bajaj Finance is mainly engaged in the business of lending.

BFL has a diversified lending portfolio across retail, SME, and commercial customers with a significant presence in both urban and rural India.

It also accepts public and corporate deposits and offers variety of financial services products to its customers.

The company is present in 4,100 locations with 158 newly opened. It has 537 gold loan branches.

Bajaj Finance has a decent dividend payout of 15%, resulting in a dividend yield of 0.5%.

The 3-year revenue of the company has grown by a CAGR of 27%. While the 3-year bottom line of the company has grown by a CAGR of 48%.

This has resulted in healthy return ratios. The company's 3-year RoE stands at 21.32 % while its 3-year RoCE stands at 11.3%.

Bajaj Finance's stock is up just 0.8% in the past year, including a 7.5% decline in the last month.

Conclusion

Investing in dividend-paying stocks can be a prudent strategy for many investors.

These stocks often offer stability and consistent income through dividend payments, which can be particularly attractive for those seeking regular returns or looking to supplement their investment portfolio with income.

Additionally, these companies typically have established track records, solid financials, and may be less volatile compared to their peers.

However, it's essential to conduct thorough research and consider various factors such as the company's financial health, dividend history, industry trends, and overall market conditions before making any investment decisions.

If you want to dwell deeper on dividend investing, use Equitymaster's powerful stock screener to check high dividend yield stocks and dividend growth stocks in India.

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...