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Dividend Stocks provide a regular source of income. (File)
In 2022, the Russia Ukraine war, high inflation, and interest rate hikes, affected stock markets across the globe. Many were hoping that 2023 will be different and the new year will bring new investment opportunities.
Unfortunately, the same sentiment has continued this year, but the reasons are different. There’s volatility in the Indian share market because of the Adani-Hindenburg saga and poor quarterly results.
The US Federal Reserve recently said that interest rates could go higher than expected, which has added to the worries.
Amid this chaos, you should carefully select the best dividend stocks to buy.
Dividend stocks make an excellent investment alternative as they provide a regular source of income and help grow your portfolio returns in the long term.
Recently, we covered articles discussing small-cap stocks that could offer big dividends in 2023 and the penny stocks that could offer massive payouts in 2023.
In today’s article, we take a look at five midcap stocks that have paid dividends consistently in the past and are likely to do so in the future.
#1 Hindustan Aeronautics
First on the list is Hindustan Aeronautics.
The company supplies aircraft, helicopters, engines, avionics, and accessories and is the main provider of maintenance, repair, and overhaul services to the Indian defence forces.
Ever since its listing in 2018, Hindustan Aeronautics has declared eight dividends to its shareholders.
Its five-year average dividend payout and dividend yield stand at 37% and 3.4%, respectively, making it the most attractive midcap government enterprise.
The dividend per share has been growing consistently in the last five years on the back of steady growth in revenue and profit.
During the FY18-22 period, sales went up over 33%, and the net profit went up by over 150%. A heavy order book and the cost-plus nature of majority of HAL’s contracts are the primary reasons for revenue and profit growth.
The return ratios are also high, with a 5-year average return on equity (RoE) at 22% and a 5-year average return on capital employed (RoCE) at 31%.
To add to this, the company paid off all its debt in financial year 2022 and has healthy cashflows.
As of September 2022, the company has an order book of Rs 838.6 billion (bn), indicating good revenue visibility in the medium term.
All these indicate a high dividend for shareholders in 2023.
In the last one year, shares of the company have zoomed by 105%.
#2 Colgate-Palmolive (India)
Second on the list is Colgate-Palmolive.
An FMCG company that has maintained its leadership since 1990, Colgate has over 51% market share in toothpaste, 48% in toothpowder, and 30% share in the toothbrush market.
The company has been consistent in paying dividends to its shareholders since 2001.
In the last five years, its dividend payout and dividend yield have averaged 94.3% and 2.3%, respectively.
Being an FMCG company, Colgate is cash rich and has strong cashflows.
In the last five years, its revenue and profits have grown by 25% and 60%, respectively. Throughout this five-year period, not once did the company see its revenue or profit decline. This speaks volumes about the quality of products and management of the company.
Considering all this, along with its zero-debt status and its dividend-paying history, shareholders can expect a similar or higher payout in 2023.
Shares of Colgate Palmolive have given muted returns in the last one year.
#3 Oil India
Next on the list is Oil India, another state-owned company.
It is a fully integrated oil and natural gas company engaged in exploring, developing, producing and transporting crude oil, natural gas, and liquified petroleum gas (LPG).
The company also produces electricity through solar, wind, and green hydrogen sources.
In the last five years, its revenue has grown at a compound annual growth rate (CAGR) of 14%, owing to steady volume growth. The profits also grew at a CAGR of 28% during the same time.
As a result, the company boasts of increasing margins, strong cashflows, and high return ratios.
Coming to the company’s dividends, it has paid dividends consistently and has declared thirty-two dividends in the last thirteen years.
In the last five years, its dividend payout and dividend yield have averaged 35.9% and 6.1%, respectively.
So far for 2023, the company has declared two interim dividends totalling to Rs 14.5 per share, which is already higher than previous year’s dividend payout.
In the first nine months of the financial year 2023, the company’s revenue and profits have already crossed the previous year’s numbers. This indicates a possibility of a higher dividend in 2023.
Oil India shares have gained 7.2% in the past one year with most gains coming in recent sessions on the back of rising crude prices.
Oil India Share Price – 1 Year Performance
#4 Oracle Financial Services Software (OFSS)
Fourth on the list is Oracle Financial Services Software.
There’s nothing new about IT companies paying big and consistent dividends. But, when we think about IT companies and dividends, the first few names that come to mind are TCS, Infosys, Wipro, and HCL.
After all, these Big 4 IT companies have emerged as consistent wealth creators for millions of investors over the last few decades.
However, when it comes to dividend payments, Oracle Financial Services Software (OFSS) stands above any other IT company.
The company started paying dividends in 2003, and whenever it did, it paid big.
A steady increase in dividends is due to increased profitability.
In the last five years, the company’s net profit went up by 52.7%. The return ratios are also high, with RoE at 27.2% and RoCE at 36.6% in financial year 2022.
Why is Oracle Financial’s profitability steadily increasing?
In recent years, OFSS has made significant investments in rapidly moving its solutions to the cloud and launched solutions, much ahead of its peers.
This worked well for the company as the pace of investment by financial services companies in digital capabilities had grown significantly and is expected to continue over the coming years.
In the last five years, Oracle Financial’s dividend payout and dividend yield have averaged 76% and 4.4%, respectively.
In the first nine months of the financial year 2023, the company’s profits have already crossed 70% of the previous year’s profits. This indicates a possibility of a higher dividend in 2023.
Like any other IT company, OFSS has also faced the heat of the market.
#5 Nippon Life India Asset Management
Last on the list is Nippon Life India Asset Management, one of India’s largest asset management companies.
It is engaged in the business of managing mutual funds, pension funds, and alternative investment funds and offers portfolio management services.
It offers its products and services to retail, HNI (high net worth), institutional, corporate, and offshore investors.
During the FY18-22 period, the company’s net profit went up by over 63%. A growing number of investors and cost optimisation measures undertaken by the company have contributed to the growing profits.
As a result, the company’s return ratios are increasing, and so are its cashflows. The company is also a zero-debt company.
Ever since its listing in 2017, the company has paid eleven dividends to its shareholders.
Its five-year average dividend payout and dividend yield stood at 78.7% and 2.4%, respectively.
The company has already paid Rs 4 as an interim dividend this year, which is higher than last year’s interim dividend.
Going by its track record of paying dividends, shareholders can expect a similar dividend even this year.
In the last one year, shares of Nippon Life India Asset Management have fallen by 26% due to market volatility.
Nippon Life AMC Share Price – 1 Year Performance
Since dividend stocks interest you, check out the below video where Richa Agarwal talks about dividend multibaggers for 2023.
Embed video: https://www.youtube.com/watch?v=YrBXxF0RnhY
Happy investing!
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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…