Investing is essential for securing a stable financial future. While long-term investments in companies often yield high returns, dividends provide an additional way to earn profits. Companies can either reinvest their earnings or distribute a portion as dividends to shareholders. These dividends serve as a steady income source for investors. Retail investors, whether in listed or unlisted companies, seek shares that offer consistent dividends along with growth potential. Such stocks are known as high-dividend yield stocks.
Understanding Dividend Yield
To understand high-dividend yield unlisted shares, it’s important to first grasp the concept of dividend yield. Dividend yield represents the income investors receive relative to the stock’s current price. It is calculated using the formula:
Dividend Yield = (Annual Dividend / Share Price) × 100
Krishna Patwari, Founder and Managing Director of Wealth Wisdom India Pvt. Ltd. (WWIPL.com) says, “Stocks with a higher dividend yield compared to a benchmark are considered high-dividend yield stocks. These stocks attract investors because they provide a steady income stream. Investors often reinvest dividends to grow their wealth or use them for financial goals like retirement.”
Why Invest in High-Yield Dividend Stocks?
The key advantages of high-dividend yield stocks include both capital appreciation and regular dividend payouts. To identify high-quality dividend stocks, investors should assess:
● Consistency in dividend payments
● Steady growth in dividend percentage
High-yield dividend stocks offer several other compelling reasons for investors to consider them. Here’s why:
Regular Income: These unlisted stocks provide consistent dividend payouts, allowing investors to generate steady income throughout the investment period. Over time, many high-yield stocks deliver better returns.
Financial Goal Support: The dividends from high-yield unlisted shares can be used to build a corpus for achieving financial goals. Alternatively, investors can reinvest these dividends in other options like Mutual Funds, Debt, to diversify their portfolio.
3. Downside Protection : Dividend payments act as a buffer against stock price declines. Investors continue to receive periodic returns even during market fluctuations, reducing overall risk.
4. Lower Volatility : Sectors such as utilities, consumer staples, and healthcare, known for high dividend yields, tend to be more stable compared to growth stocks.
5. Compounding Effect : Reinvesting dividends enhances wealth creation through compounding, significantly boosting total returns over time.
6. Indication of Financial Health : Companies with a strong history of dividend payments often have healthy cash flows and solid financial stability, lowering the risk of financial distress.
7. Hedge Against Inflation : Some high dividend stocks increase their payouts over time, helping investors maintain purchasing power against inflation.
Key Considerations & Risks
● Dividend Sustainability: An unusually high yield might signal underlying issues, such as a falling stock price or financial instability.
● Sector-Specific Risks: Industries like real estate and energy often offer high yields but can be highly sensitive to economic fluctuations.
● Tax Implications: Dividend income may be subject to taxation, potentially reducing overall returns.
Investing in High-Dividend Yield Stocks in 2025
This year, stocks with high dividend yields may attract more attention from investors, especially as market uncertainty could drive a preference for stable returns. Companies with a solid history of consistent dividend payouts are expected to be a key focus.
Among the companies listed, including Vedanta, Stovec Industries, Balmer Lawrie Investments, VST Industries, Castrol India, and Swaraj Engines, many have consistently provided dividends exceeding 100% over the past five years.
The start of the year is an ideal time for investors looking to improve their portfolio returns. Many investors favor dividend-paying stocks for their consistent income and potential for capital appreciation, while the unlisted market also offers excellent opportunities for high-dividend stocks. Krishna Patwari provides an in-depth review of dividend payouts and market positioning to help investors choose wisely:
HDFC Securities: Announced a ₹510 dividend per share for 2024, up from ₹440 in 2023. With a last traded price of ₹10,000, the dividend yield is 5.1%.
GKN Driveline: Issued a dividend of ₹64 per share in 2024, slightly lower than ₹69 in 2023. Its last traded price is ₹1,800, and with a dividend of ₹64, the dividend yield is 3.55%.
Axles India: The dividend rose from ₹9 in 2023 to ₹14 in 2024. With a last traded price of ₹725 and a total dividend of ₹35.68, the yield stands at 4.92%.
Cochin Airport (CIAL): Issued ₹4.5 per share as a dividend in 2024, up from ₹3.5 in 2023. It is currently trading at ₹450, and with a dividend of ₹4.5, the dividend yield is 1%.
Otis Elevator: Reduced its dividend from ₹150 in 2023 to ₹135 in 2024. At a stock price of ₹4,100, the yield remains solid at 3.3%.
C And S Electric: Maintained a consistent dividend of ₹20 per share in both 2023 and 2024. With the stock now at ₹1,070, the yield is 1.9%.
Carrier Airconditioning: Massive dividend growth from ₹1 in 2023 to ₹9.5 in 2024. Its current trading price is ₹555, and with a dividend of ₹9.5, the dividend yield stands at 1.71%.
Key Considerations for Investing in High-Dividend Yield Unlisted Shares in India
● Focus on companies with a consistent and reliable dividend history, indicating financial stability.
● Ensure the dividend payout ratio is sustainable; a high ratio may signal future financial strain.
● Assess the company’s earnings, debt, and cash flow to confirm it can maintain dividend payments.
● Consider the stability of the company’s industry, as it influences dividend sustainability.
● Understand the tax implications of dividend income, as it affects overall returns.
● Account for the impact of inflation and economic conditions on dividend payments, as companies may reduce dividends during tough times.
Krishna Patwari adds, “Wealth Wisdom India Pvt. Ltd. assists investors in understanding stocks by providing access to the latest company reports on our website. This helps investors evaluate key factors such as cost per share, price performance, business activities, shareholding patterns, and dividend history. Additionally, they can compare returns with WWIPL’s Primex 40 Index, enabling them to make informed decisions in the unlisted space, particularly for high-dividend shares.”
Stocks with high dividend yields usually provide steady income through dividends, making them especially attractive when overall market growth is sluggish. While these stocks typically experience lower earnings growth, in a period of slowing earnings—paired with high market valuations—investors may turn to value stocks that offer dependable yields while sustaining a comparable growth rate. WWIPL.com, with its expertise, is committed to guiding investors through this investment strategy and supporting them on their financial journey.
