Dividends are form of passive income…

How to generate dividend income? By buying dividend paying stocks at right price.

What makes dividends, one of the best passive income? Number one reason is, they originate from equity.

What makes equity-factor so special here? Equity yield can improve with time.

A stock which is yielding 0.5% at the time of purchase, can yield much higher with passage of time.

Let me give you two examples:

TCS:
Suppose a person bought shares of TCS in year Mar’09. Details are as below:

Share Price (2009): Rs.132/share.
No of shares bought: 10 nos.
Cost paid to buy TCS: Rs.1,320.
Dividend paid in 2009: Rs.14/share.
Total dividend income in 2009: Rs.140.
Dividend yield in 2009: 10.6%.
Suppose this person held on to his shares till year 2018.

What will be his dividend yield as on Mar’18?

[Note: Bonus shares 1:1 was also issued to all shareholders between Mar’09 & Mar’18]

Cost paid to buy TCS: Rs.1,320.
No. of shares held in 2018: 20 nos (1:1 bonus share)
Dividend paid in 2018: Rs.50/share.
Total dividend income in 2018: Rs.1,000
Dividend yield in 2018: 75.7%.
Dividend Yield in 2009: 10.6%

Dividend Yield in 2018: 75.7%

If the example of TCS is looking to good to believe, let’s take a more submissive example.

HUL:
Suppose a person bought 10 nos shares of Hindustan Unilever Ltd (HUL) in 2009.

Share Price (2009): Rs.239/share.
No of shares bought: 10 nos.
Cost paid to buy HUL: Rs.2,390.
Dividend paid in 2009: Rs.7.5/share.
Total dividend income in 2009: Rs.75.
Dividend yield in 2009: 3.15%.
Suppose this person held on to HUL shares till year 2018. What will be his dividend yield as on Mar’18?

[Note: No bonus shares were issued to shareholders between Mar’09 & Mar’18]

Cost paid to buy HUL: Rs.2,390.
No. of shares held in 2018: 10 nos.
Dividend paid in 2018: Rs.20/share.
Total dividend income in 2018: Rs.200
Dividend yield in 2018: 8.36%.
Dividend Yield in 2009: 3.15%

Dividend Yield in 2018: 8.36%

What does the above 2 examples of TCS and HUL suggest?

Just by holding on to “good stocks” for long term (10 years), their dividend yield itself will become high enough to beat the returns of any debt instrument.

Is it that easy? Buy dividend paying stocks, hold for long term, and that’s it?

Yes it is this easy. The only control point is, one must buy only “good stocks“.

List of Highest Dividend Paying Stocks in India 2019

SL Company Current Market Price (Rs.) Dividend Paid in Lump sum 5Y Avg (Rs.Cr.) Dividend Payout (%) Dividend Yield (Last 5Y Avg.) % Dividend Yield (Latest) %
1 Coal India Limited (CIL) 224 14,259 153.43% 10.13% 7.37%
2 Tata Consultancy Services (TCS) 2,026 9,636 38.18% 2.43% 2.39%
3 ONGC 142 7,691 38.56% 5.38% 4.26%
4 Hindustan Zinc 255 6,389 68.87% 5.93% 3.14%
5 ITC Ltd. 283 5,846 52.09% 2.20% 1.67%
6 Infosys 751 5,380 33.30% 5.01% 3.43%
7 IOCL 138 5,321 24.93% 8.65% 7.25%
8 HUL 1,822 3,376 64.46% 0.86% 0.99%
9 NTPC Ltd. 140 3,440 33.26% 2.98% 3.50%
10 NMDC 96 3,042 117.49% 8.17% 4.32%
11 SBI 296 1,803 -27.54% 0.69% 0.00%
12 Reliance Industries Ltd. (RIL) 1,246 2,417 7.19% 0.52% 0.41%
13 ICICI Bank 361 1,984 29.27% 0.73% 0.00%
14 Vedanta 166 3,893 53.65% 6.65% 12.76%
15 HCL Tech 1,032 2,309 31.36% 1.68% 1.18%
16 HDFC   1,964 2,138 17.57% 0.68% 0.90%
17 Wipro 367 1,937 25.08% 2.09% 0.27%
18 Bharti Infratel 292 1,532 63.47% 2.80% 1.37%
19 HDFC Bank 2,107 1,210 6.92% 0.22% 0.00%
20 Oil India 171 1,400 52.47% 12.21% 13.19%
21 Hero Motocorp 2,775 1,474 39.87% 2.66% 3.06%
22 Power Fin. 102 1,521 25.97% 8.78% 7.65%
23 BPCL 339 2,784 35.15% 7.33% 4.33%
24 Bajaj Auto 2,587 1,505 36.99% 2.01% 2.13%
25 NHPC 25 1,287 46.64% 4.81% 4.82%
26 REC 123 1,410 30.34% 8.84% 8.17%
27 HPCL 232 1,664 26.18% 10.69% 6.57%
28 L&T 1,320 906 16.82% 0.74% 0.00%
29 GAIL 331 1,197 25.93% 2.31% 2.35%
30 Indiabulls Hsg 678 1,309 36.70% 4.86% 6.03%
31 Power Grid 189 1,082 13.13% 1.09% 1.30%
32 Axis Bank 710 1,164 422.33% 0.64% 0.77%
33 Tata Steel 474 844 20.25% 1.98% 2.17%
34 ICICI Pru 285 866 53.49% 2.29% 2.42%
35 M&M 689 961 22.06% 1.76% 1.08%
36 Tech Mahindra 740 935 23.38% 1.70% 1.43%
37 Interglobe Avia 1,174 844 37.65% 809.98% 2.72%
38 Maruti Suzuki 6,945 1,039 13.46% 0.50% 1.08%
39 NLC India 64 642 34.74% 6.30% 6.61%
40 Asian Paints 1,449 713 37.61% 0.51% 0.71%
41 Bank of Baroda 111 397 -16.32% 1.35% 0.00%
42 SJVN 25 641 52.35% 6.28% 8.00%
43 Nestle 11,488 596 48.63% 0.54% 0.75%
44 Siemens 1,028 445 49.80% 1.22% 0.68%
45 Dabur 447 385 35.92% 0.49% 0.61%
46 Sun Pharma 420 462 -93.48% 0.49% 0.79%
47 UltraTech Cement 3,475 265 11.85% 0.28% 0.29%
48 JSW Steel 272 349 7.55% 2.05% 1.00%
49 Godrej Consumer 699 274 27.42% 0.89% 1.29%
50 HDFC Life 374 182 16.45% 0.24% 0.36%
51 Titan Co. 992 163 14.05% 0.19% 0.26%
52 Britannia 3,222 216 22.78% 0.56% 0.68%
53 Eicher Motors 19,673 191 11.17% 0.36% 0.51%
54 Bosch 19,040 295 21.55% 0.50% 0.47%
55 Motherson Sumi 141 300 34.16% 1.70% 1.42%
56 Hindalco 210 233 16.24% 0.52% 0.62%
57 Cipla 519 165 11.22% 0.40% 0.39%
58 Pidilite 1,122 192 20.11% 0.33% 0.43%
59 Aurobindo Pharma 788 137 7.58% 0.39% 0.48%
60 Zee Ent 361 216 11.30% 0.62% 0.69%