The Highest Dividend Yield Stocks You Need to Know About

Are you looking for ways to make regular income for you? If so, high dividend yield stocks might just be the answer. These stocks are companies that pay regular dividends to their shareholders, and some of them even offer high returns. Simply put, dividend yield tells you how much money you can expect to earn from a stock through dividends.

For instance, if you invest in a stock with a 10% dividend yield, you will earn 10% of your investment as a dividend each year. High dividend yield stocks are especially popular, as they provide a steady flow of income, making them ideal for people looking for regular returns. But there's a lot more to know before jumping in.

So, let's get started.

Benefits of High Dividend Yield Stocks

If you want to earn a reliable income from your investments, high dividend yield stocks might be the way to go. Here are some of the benefits to give you a clearer picture: 

1. Steady income stream: You can receive consistent income by investing in companies that pay regular dividends. For example, MRF has been paying over ₹20 per share in dividends every year for the last 2 decades.
2. Lower volatility: High dividend yield stocks tend to be less volatile than growth stocks. This means they are less likely to face sudden drops. For example, companies like Bharat Petroleum (BPCL) and Coal India provide stability as they are less affected by sudden market changes.
3. Compounding growth: When you reinvest your dividends back into more shares of the same stock, you can take advantage of compounding. Over time, this increases your potential returns.
4. Capital appreciation: High dividend yield stocks also offer long-term price growth. Some of these stocks have seen their stock prices rise steadily over the years. For instance, BPCL's price has grown by ~15% annually over the past 3 years.

 

Source: Finology Ticker 

However, it's important to know how to pick the right dividend-yield stocks to add to your portfolio.

How to Choose Dividend Yield Stocks?

Picking the right stock requires more than just looking at the dividend yield. Here are a few simple tips to help you out:

1. Dividend yield ratio: The higher the yield, the higher the dividend payouts. However, don't be fooled by an unusually high yield. Always check the price trends along with the dividend yield, as a high yield may result from the stock price falling.
2. Consistency: Look for companies with a history of paying consistent dividends. The best companies pay dividends even during tough times. For instance, companies like Canara Bank have maintained regular payouts over the years. 
3. Financial health: Check for strong earnings, good cash flow, and low debt. If a company is struggling financially, it may reduce or cut dividends altogether. Make sure the company can afford to pay its dividends in the long run.
4. Payout ratio: It is the percentage of earnings a company pays out as dividends. A good range of 30% to 60% indicates the company is distributing enough to keep shareholders happy while also investing in future growth.

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Highest Dividend Yield Stocks in India

Investing in high dividend yield stocks is a popular strategy as they offer both income and stability. Let's take a look at some of the highest dividend yield stocks as of January 2025.

1. VST Industries Ltd. – 44.06%

VST Industries Ltd. operates in the tobacco sector. It currently offers a dividend yield of 44.06%, making it an ideal choice for income-seeking investors. However, before investing, you should always consider the potential regulatory risks associated with the tobacco industry.

2. Xchanging Solutions Ltd. – 29.21%

It is an IT and outsourcing company that stands out with a dividend yield of 29.21%. Even though the company is a smaller player compared to large-cap companies, its solid dividend policy has earned it a loyal investor base. However, you should consider the company's size and its future growth potential before making any investment decisions.

3. Canara Bank – 15.87%

Canara Bank, one of India's top public sector banks, offers a dividend yield of 15.87%, making it one of the highest among Indian financial stocks. This high dividend yield is particularly attractive for those looking for a stable income source. However, keep in mind that being a public sector bank, it may be subject to government policies and regulations, which can occasionally impact its financials.  

4. NMDC Ltd. – 10.73%

It is a public-sector mining company with an impressive dividend yield of 10.73%. The company has maintained a solid dividend payout policy due to its consistent earnings from iron ore exports and domestic sales. If you are looking to enter the commodity trading world, you may find NMDC appealing. However, it's important to consider the cyclical nature of the mining industry, where market conditions and global demand for iron ore can impact profitability.  

5. Bharat Petroleum Corporation Ltd. (BPCL) – 10.63%

BPCL, a player in India's oil and gas sector, offers a dividend yield of 10.63%. The company has benefitted from India's growing energy demand, with its refining and marketing operations seeing significant growth in recent years. BPCL's dividend yield is particularly appealing for investors seeking both income and growth. The stock has delivered capital appreciation in addition to its high dividends, making it an attractive option. However, the energy sector can be volatile, with fluctuations in global oil prices and government regulations impacting the company's profitability.

6. Andhra Paper Ltd. – 10.49%

Andhra Paper Ltd., a major player in the paper industry, offers a dividend yield of 10.49%, making it a solid choice for income investors. While the paper industry may not have the explosive growth potential of some other sectors, the company benefits from consistent demand in the paper industry. However, environmental regulations and changes in raw material costs can affect the paper industry, impacting profitability.

7. Indian Oil Corporation Ltd. (IOCL) – 8.69%

Indian Oil Corporation Ltd. (IOCL) is an oil and gas company with a dividend yield of 8.69%. As a government-owned corporation, it is relatively stable, making it an attractive option for consistent income. The company benefits from the growing demand for energy in India, but as with any company in the energy sector, it is subject to fluctuations in global oil prices, which can impact its profitability.

8. Chennai Petroleum Corporation Ltd. (CPCL) – 8.68%

This oil and gas company offers a dividend yield of 8.68%, benefiting from India's growing demand for energy. CPCL is part of the larger Indian Oil Corporation group, which provides it with stability and financial strength. However, as we discussed earlier, the oil and gas sector can experience volatility.

9. Hindustan Petroleum Corporation Ltd. (HPCL) – 7.63%

HPCL is another prominent name in India's oil and gas sector, offering a 7.63% dividend yield. As a government-owned entity, it benefits from stability and a strong market presence in the energy sector.

10. Coal India Ltd. – 6.49%

Coal India Ltd., the largest coal producer in India, offers a dividend yield of 6.49%. The company's stable operations in the coal sector allow it to maintain high dividend payouts. However, you must remember that the coal industry faces environmental challenges and regulatory pressure, which can affect the company's cash flows and dividend payouts.

Having trouble keeping track? Here's a table that summarises the list of the highest dividend yield stocks in India.

 

Company	Dividend Yield %
VST Industries Ltd.	44.06%
Xchanging Solutions Ltd.	29.21%
Canara Bank	15.87%
NMDC Ltd.	10.73%
Bharat Petroleum Corporation Ltd.	10.63%
Andhra Paper Ltd.	10.49%
Indian Oil Corporation Ltd.	8.69%
Chennai Petroleum Corporation Ltd.	8.68%
Hindustan Petroleum Corporation Ltd.	7.63%
Coal India Ltd.	6.49%

Data as of 3rd Jan, 2025 | Source - ET Money

While these stocks may seem attractive, it's important to be aware of the risks that come with investing in high-dividend-yield stocks.

Risks of Investing in High-Dividend Yield Stocks

High dividend yield stocks can be an excellent way to generate regular income, but they come with their share of risks. Here are a few key ones to keep in mind:

1. Sustainability of Dividends

Companies in cyclical industries, like metals and real estate, can face difficult times when the economy slows down. For instance, Tata Steel reduced its dividend from ₹51 per share in 2022 to just ₹3.6 per share in recent years due to a decline in profits.
 

Source: Finology Ticker

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2. Limited Growth Potential

Many high dividend-paying stocks come from mature industries, which may not have much room for growth. These companies focus more on paying dividends than reinvesting in new projects or expanding their business. 

3. Dividend Traps

A high dividend yield can sometimes signal a "dividend trap," where the company's stock price has fallen sharply, increasing the yield. For example, CPCL's 8.6% yield looks appealing, but the company's falling stock price and declining sales make it a risky investment. 

That's why you should always check the financial health of the company before investing in high dividend yield stocks. If you are struggling with it, you can use our advanced tools in Ticker to analyse the company.

Conclusion

High dividend yield stocks are a great way to earn regular income while investing in the stock market. They offer steady payouts, lower volatility, and the potential for compounding growth. However, it's important to choose stocks wisely by considering factors like dividend sustainability, financial health, and payout ratios.

But, as with any investment, there are risks, including the possibility of unsustainable dividends and limited growth potential. By doing your research and carefully selecting high dividend yield stocks, you can create a reliable, income-generating portfolio that offers long-term stability.

Disclaimer: The securities quoted are for illustration only and are not recommendatory. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The readers are advised to further research on the subject company and consult an investment advisor before taking any decisions. Nothing contained in this document shall be construed as investment or financial recommendation or advice. The author may change their views as and when time warrants without any notice.