5 Penny Stocks with High Dividend Yields up to 17%. Are They Worth It?

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.

Now, 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.

What makes this more exciting is if you look at the penny stocks segment. There's no general definition for penny stocks. Penny stocks are shares of listed companies with low market capitalisation. These stocks usually have low share prices, typically less than Rs 100 and often less than Rs 50.

Investing in these low-priced stocks that pay big dividends can be advantageous because they sometimes offer a higher yield than stocks that are priced higher.

Additionally, these stocks may have the potential for significant capital appreciation if the company performs well.

For investors looking for passive income from dividends...here are five penny stocks with high dividend yields.

These penny stocks have the highest dividend yield for the financial year ended March 2023.

#1 Bhansali Engineering Polymers

First on the list is Bhansali Engineering Polymers, a smallcap company with a marketcap of Rs 22 billion (bn).

Bhansali Engineering is engaged in manufacturing and sale of ABS Resins, AES Resins, ASA resins, SAN resins and their alloys with other plastics in the Indian market.

It has a JV with Nippon A&L Inc, and the subsidiary company is named Bhansali Nippon A&L Pvt Ltd. This company provides sales support and technical support to Bhansali Engineering.

For the financial year ended March 2023, the company paid out a dividend amounting to Rs 17 per share. This is substantially higher compared to the previous year's Rs 3 per share.

As a result, the company's dividend yield shot up to 17.4%.

Have a look at the table below to see its rich dividend history over the years -

Bhansali Engineering Dividend Payout History

Year End	2019	2020	2021	2022	2023
Dividend per share (Rs)	0.5	0.5	1.0	3.0	17.0
Dividend yield (%)	0.7	1.7	0.7	2.4	17.4
Dividend payout ratio (%)	17.6	12.4	5.0	14.2	206.2

Data Source: Ace Equity

For the current financial year (FY24), the company has already declared an interim dividend of Rs 1 per share. The record date is 26 July 2023.

Prior to this, the company's board also issued bonus shares in the ratio of 2:1.

The company was able to declare a special dividend of Rs 14 last year as it saw operational efficiencies hit the roof.

During the year, sales volume stood at 73,388 MTS as against 59,575 MTS in FY22. It achieved optimum capacity utilisation of 96.7%.

Foreign investors have been adding stake in the company for the past three quarters while promoters have also bought some shares from the open market in June 2023.

In the past one year, shares of the company have gained 25%.

To know more, check out Bhansali Engineering's 2022-23 annual report analysis.

#2 CESC

Next on the list is CESC, the flagship company of RP-Sanjiv Goenka group engaged in the business of generation and distribution of electricity.

CESC is India's first fully integrated electrical utility company with private participation in generation, transmission, and distribution of electrical power in many Indian states including Kolkata and West Bengal.

For the financial year ended March 2023, the company paid out dividend of Rs 4.5 per share.

The company's dividend yield for FY23 stands at 6.8%.

Have a look at the table below to see its dividend history over the years -

CESC Dividend Payout History

Year End	2019	2020	2021	2022	2023
Dividend per share (Rs)	1.8	2.0	4.5	4.5	4.5
Dividend yield (%)	2.4	4.9	7.6	5.9	6.8
Dividend payout ratio (%)	19.6	20.9	44.8	43.9	44.4

Data Source: Ace Equity

While the company has lagged in terms of growth in revenue and profit, it has maintained a healthy dividend payout and averages a dividend yield of 5.5%.

It has a power distributing license for the Kolkata and Greater Noida region with validity up to September 2038.

It also offers comfort on valuations with its price to book multiple coming at 0.9x.

The company's share price performance over the past one year has been disappointing with shares trading at the same level as a year ago.

To know more, check out CESC's financial factsheet and its latest quarterly results.

#3 Shree Digvijay Cement

Next on this list is Shree Digvijay Cement.

As the name suggests, the company is primarily engaged in the business of manufacture and sale of cement.

Its product portfolio includes various kinds of cement such as Portland Pozzolana cement, OPC Cement, SRPC Cement, Oil Well cement, etc. The company sells cement under the brand name 'Kamal Cement'.

For the financial year ended March 2023, the company paid out dividend of Rs 4 per share. This results in a dividend yield of 6.5%.

Shree Digvijay Cement Dividend Payout History

Year End	2019	2020	2021	2022	2023
Dividend per share (Rs)	0.0	1.5	2.5	3.5	4.0
Dividend yield (%)	0.0	6.3	4.0	5.1	6.5
Dividend payout ratio (%)	0.0	37.6	65.9	91.2	100.6

Data Source: Ace Equity

In the past five years, the company's revenue and profits have shot up compared to earlier years as it achieved full capacity utilization.

Three years back, it had limestone availability issues while one of its plants was also inefficient, hardly producing anything. As things stand now, the company has abundant availability of limestone in its captive mines.

Last year, the company also signed a hybrid power contract for hybrid wind and solar power capacity with Continuum Energy.

The company has also received environmental clearances for its new plant.

With cement prices on the rise, the sentiment has turned in favor of the company.

Foreign investors have shown increased interest in the stock as their holding has increased from 0.12% in March 2023 to 2.84% in June 2023.

In the past one year, shares of the company have rallied 26%.

#4 Sundaram Finance Holdings

Next company on this list is only available on the NSE - Sundaram Finance Holdings.

The company is primarily engaged in the business of investments, business processing, and support services.

It generates a significant portion of its income from dividend flows from the portfolio companies.

For the financial year 2023, the company paid out Rs 4 per share in dividend. This included a final dividend of Rs 1.5, a special dividend of Rs 1 per share and another special dividend of Rs 1.5 per share.

Its FY23 dividend yield comes to 5.1%.

Sundaram Finance Holdings Dividend Payout History

Year End	2019	2020	2021	2022	2023
Dividend per share (Rs)	1.8	1.3	0.5	2.8	4.0
Dividend yield (%)	2.1	3.0	0.7	4.0	5.1
Dividend payout ratio (%)	19.2	24.2	10.2	37.4	37.4

Data Source: Ace Equity

In FY23, the company saw a sharp jump in its net profit as income from dividend spiked. It registered a 47.8% rise in consolidated net profit to Rs 2.4 bn as dividend income from portfolio companies came in at Rs 974.4 million (m). This is more than double as against the total dividend of Rs 409 m in FY22.

The company is almost debt free and also offers comfort on valuations. It currently trades at a price to book multiple of 0.6x.

In the past one year, shares of the company have gained over 30%.

#5 Union Bank of India

Last on this list is Union Bank of India.

Amalgamation of Andhra Bank and Corporation Bank into Union Bank was effective from 1 April 2020. Post amalgamation, the merged entity enjoys the benefits of a larger balance sheet and wider geographical reach.

For the financial year 2023, the bank paid out a dividend per share of Rs 3 per share. This is much higher compared to FY22's Rs 1.9 per share.

Its dividend yield for FY23 comes to 4.5%.

Union Bank of India Dividend Payout History

Year End	2019	2020	2021	2022	2023
Dividend per share (Rs)	0.0	0.0	0.0	1.9	3.0
Dividend yield (%)	0.0	0.0	0.0	4.9	4.5
Dividend payout ratio (%)	0.0	0.0	0.0	24.7	24.1

Data Source: Ace Equity

The government of India continues to provide maximum support to PSBs including Union Bank of India. It holds 83.5% stake in the lender as of June 2023.

Post the merger, Union Bank of India has emerged as one of the fastest growing banks as it expanded advances and improved asset quality.

The net non-performing assets (NPAs) of the bank have plunged dramatically.

Last week, Union Bank reported an over two-fold jump in its net profit to Rs 32.4 bn in the June quarter. This was aided by a decline in bad loans and an improvement in interest income.

The bank's gross NPAs declined to 7.34% of gross advances from 10.22% a year ago.

The bank remains optimistic about robust growth in the near future and is well-placed to capitalise on the pickup in the corporate credit cycle.

The lender is now planning to raise Rs 100 bn in equity capital not to buffer up its core capital base but to meet the regulator's mandate of having a 25% public float.

In the past one year, shares of the bank have gained 137%.

Which other penny stocks make the cut?

Apart from the above, here are other penny stocks with high dividend yields for FY23.

Company	Current Price (Rs)	FY23 DPS (Rs)	Dividend Yield (%)
Bank Of Maharashtra	34.3	1.3	5.2
SMC Global Securities Ltd.	73.3	2.4	3.4
Geojit Financial Services Ltd.	46.7	1.5	3.8
Ujjivan Small Finance Bank Ltd.	42.9	1.3	4.9
Alembic Ltd.	77.8	2.2	3.7
JM Financial Ltd.	73.5	1.8	3.0
Orient Paper & Industries Ltd.	41.6	1.0	2.7
Bank Of India	84.4	2.0	2.7
Dwarikesh Sugar Industries Ltd.	94.0	2.0	2.3

Data Source: Ace Equity

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

This screener allows you to screen stocks based on both pre-set queries and your own criteria.

Here are some of the popular screens:

• Best Indian Penny Stocks with Dividend Growth
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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...