Top 7 Best Dividend-Paying Stocks in India for 2020: High-Yield Picks for Passive Income

Dividend-paying stocks serve as an excellent source of passive income for investors, and let’s face it—who doesn’t appreciate some extra cash now and then? These stocks allow companies to share a portion of their profits with shareholders, usually once or twice a year, in the form of dividends. The beauty of dividend income lies in its tax advantage: Dividends up to ₹10,00,000 are tax-free! Yes, you read that correctly—dividends up to this amount are not subject to tax, making them an attractive income stream for investors.

Having some extra funds flowing into your bank account is always a pleasant surprise. That's why it's a good idea to keep dividend-paying stocks in your investment portfolio. While some investors prefer to exclusively invest in dividend stocks, others may not consider them at all. Personally, I like to maintain a diversified portfolio that includes a mix of dividend-paying and non-dividend stocks. For me, dividends represent a way of reaping some rewards while still holding onto the stock. They provide an additional layer of return on top of any capital appreciation. Below is a list of dividend-paying stocks that I personally hold and highly recommend.

Disclaimer: Before making any investment decisions, it is essential to conduct your own research and seek professional advice.

7 Best Dividend-Paying Stocks in India

1. Coal India (COALINDIA)

Coal India, the world’s largest coal producer, is a public sector company responsible for about 82% of India's coal production. It's a key player in the country's energy sector, making it a reliable choice for dividend investors.

P/E Ratio: 4.27
D/E Ratio: 10.21 (over the last 5 years)
Revenue Growth: 4.84% (yearly over the last 5 years)
Net Income Growth: 4.02% (yearly over the last 5 years)
Dividend Yield: 10.37%

2. Indian Oil Corporation (IOC)

IOC is India’s largest public sector oil refining company, engaged in the production and sale of petroleum products and petrochemicals. It’s a stable option for those looking for long-term growth and dividend payouts.

P/E Ratio: -80.39 (negative due to losses in some years)
P/B Ratio: 0.74
D/E Ratio: 80.18% (over the last 5 years)
Revenue Growth: 1.13% (yearly over the last 5 years)
Dividend Yield: 5.43%

3. Infosys (INFY)

One of the most well-known IT services companies in India, Infosys is a leader in consulting, outsourcing, and next-gen IT services. While its dividend yield may not be as high as others, its steady growth makes it an attractive pick for investors seeking capital appreciation along with dividend payouts.

P/E Ratio: 27.71
P/B Ratio: 6.91
D/E Ratio: 1.41% (over the last 5 years)
Revenue Growth: 10.52% (yearly over the last 5 years)
Net Income Growth: 6.05% (yearly over the last 5 years)
Dividend Yield: 1.63%

4. ITC Limited (ITC)

ITC, known for its diverse portfolio in FMCG, hotels, paperboards, packaging, and agribusiness, is a top choice for income-focused investors. The company consistently offers high dividend yields, making it a favorite among dividend investors.

P/E Ratio: 13.37
P/B Ratio: 3.12
D/E Ratio: 0.16% (over the last 5 years)
Revenue Growth: 5.34% (yearly over the last 5 years)
Net Income Growth: 9.64% (yearly over the last 5 years)
Dividend Yield: 6.09%

5. NMDC Limited (NMDC)

NMDC is a public sector company primarily engaged in iron ore mining. Although it has faced some revenue challenges recently, its high dividend yield makes it a notable mention for income-seeking investors.

P/E Ratio: 7.21
P/B Ratio: 0.93
D/E Ratio: 2.12% (over the last 5 years)
Revenue Growth: -3.26% (yearly over the last 5 years)
Net Income Growth: -10.86% (yearly over the last 5 years)
Dividend Yield: 6.29%

6. Oil and Natural Gas Corporation (ONGC)

ONGC is one of India’s largest energy companies, operating in the exploration, development, and production of oil and natural gas. Its strong market position in the energy sector ensures regular dividend payouts.

P/E Ratio: 7.58
P/B Ratio: 0.37
D/E Ratio: 42.57% (over the last 5 years)
Revenue Growth: 19.44% (yearly over the last 5 years)
Net Income Growth: -9.87% (yearly over the last 5 years)
Dividend Yield: 7.61%

7. Power Grid Corporation of India (POWERGRID)

As a state-owned Maharatna company responsible for transmitting around 50% of India’s total power, Power Grid is a solid choice for those looking for both growth and stability, with an attractive dividend yield.

P/E Ratio: 8.19
P/B Ratio: 1.40
D/E Ratio: 240.8% (over the last 5 years)
Revenue Growth: 17.3% (yearly over the last 5 years)
Net Income Growth: 16.99% (yearly over the last 5 years)
Dividend Yield: 5.78%

These seven stocks represent a diverse set of sectors, from energy and oil to IT and FMCG, offering a variety of growth and dividend income potential. Of course, there are many other dividend-paying stocks out there, and this list is by no means exhaustive. However, I believe these companies provide a solid foundation for anyone looking to build a dividend-focused portfolio.

If you already hold other dividend stocks or have personal favorites, I’d love to hear about them. Please feel free to share your thoughts in the comments below. And if you have any questions about the stocks mentioned, don't hesitate to ask—I’d be happy to help!

Happy Investing!