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There are a handful of stocks in the Indian markets that are always on the radar of dividend seekers. Some stocks are just known to give dividends quarter on quarter and generate a healthy cash flow for investors. One stock that is amongst my favorites and I love to call it an ‘income stock’ is government-owned Indian Oil (NS:IOC) Corporation.
With a market capitalization of over INR 1,03,226 crores, New Delhi-headquartered IOC is engaged in the refining and sale of petroleum products and has also made it to the Fortune Global 500 companies list 2022. When it comes to high dividend-paying companies, no list is complete without IOC.
The stock is currently trading at a mouth-watering dividend yield of 11.21% with the current price being INR 73.35, compared to the industry’s average of 1.74%. The recent bonus issue in the ratio of 1:2 has further reduced the price of IOC, making it more affordable price-wise. Not just the yield, but the dividend payout ratio of IOC is also impressive, at 0.46 (for FY22), while it was even higher at 0.51 for FY21. The payout ratio is an important metric to look at while narrowing down a dividend stock, as it tells how much dividends the company pays from its net earnings. A payout ratio of 0.5 means, the company distributes 50% of its net earnings to its shareholders in the form of dividends. This ratio keeps on changing as net earnings and the management’s plans to distribute dividends based on future requirements of this excess cash changes.
It is not just a regular dividend-paying company but pays very high dividends. One reason IOC regularly pays dividends is that it is a PSU and the dividends are an important source of revenue for the government apart from taxes, hence retail investors get benefited from the government’s attempt to take out cash from the firm. Not all government entities pay dividends, but those which are profitable such as Housing and Urban Development Corporation Ltd (NS:HUDC), Coal India (NS:COAL), Bharat Petroleum Corp. Ltd. (NS:BPCL), Hindustan Petroleum Corporation Ltd (NS:HPCL), etc. generally shell out decent cash for the government in the form of dividends.
Coming back to IOC, the company is all set for another dividend payout of INR 2.4 per share. The ex-dividend date of the next payout is 11 August 2022 and the record date is 12 August 2022. You need to have shares in your Demat account by the record date, meaning they have to be bought before the ex-date for the shareholder to be eligible for the dividend. At the current price of INR 73.35, the dividend of INR 2.4 per share translates into a lucrative yield of 3.27%.