At a time when equities have been oscillating wildly between losses and gains, several market experts believe well dividend paying stocks could be a key to saving your portfolio from diving deep into the red.

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A dividend — usually sourced from the company’s net profits — can be described as a reward that publicly-listed companies extend to their shareholders.

Such rewards can either be in the form of cash, cash equivalent, shares, etc. and are mostly paid from the remaining share of profit once essential expenses are met.

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"Good dividend paying stocks are usually bought when the investor sentiment is conservative and the market is uncertain about the future trajectory," a dealer said.

This uncertainty can be caused by multiple factors such as geopolitical tensions, prospects of higher and sooner-than-expected hike in interest rates across the globe and inflationary pressures.

The nervousness in the market is also reflected in the surging price of gold — a safe store of value during an economic crisis. Gold prices touched a more than one-week high today, as an easing dollar supported greenback-priced bullion.

Meanwhile, Rohan Mehta, CEO and Fund Manager, Turtle Wealth, sees some downside in the market if the Nifty50 index breaches the crucial support level of 15,500 points.

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Market participants believe just betting on the best dividend paying stocks is not sufficient to hedge one's portfolio against the market headwinds, but looking at the future business prospects of the company is also a key factor to keep in mind while selecting a stock.

Mehta is of the view that companies that offer a good dividend yield along with a foreseeable growth story are a good play at this point in time.

Here are some good dividend paying stocks recommended by Samco Securities:

Bajaj Auto

The brokerage firm believes what differentiates Bajaj Auto from other two-wheeler makers in India is its relentless focus on international footprints. The auto maker has managed to de-risk its business by not being over-reliant on any one geography or product. The company is a high dividend paying stock with a payout ratio of 83.4 percent and provides a dividend yield of 3.84 percent, the brokerage firm said.

GAIL India

GAIL India enjoys a dominant position in the natural gas transmission business with a market share of 70 percent, catered to by its large pipeline network covering 13,340 km. On the dividends front, the company has constantly maintained a dividend payout ratio of 36.2 percent which is not very high, but its excellent superior dividend yield currently at 5.95 percent justifies including GAIL in the model portfolio, making it a great dividend stock, said Samco Securities.

Hindustan Zinc

Hindustan Zinc is the second-largest zinc-lead miner and fourth-largest zinc-lead smelter globally. With a market share of 78 percent by volume, the metal player enjoys a dominant position in the domestic zinc market. The company has a dividend payout ratio of 113 percent in FY21 leading to a dividend yield of 6.27 percent.

SJVN

SJVN is a mini ratna company promoted by the Government of India holding 59.92 percent stake and the Governor of Himachal Pradesh owning 26.85 percent while the balance stake in the entity is held by public shareholders. SJVN has a dividend payout ratio of 52.2 percent. Currently the company provides a dividend yield of 8 percent. The company has a good dividend track report and has consistently declared dividends for the last 5 years.

ITC

The cigarette manufacturer has expanded into education and stationery products, hospitality, paperboards and packaging, among others A strong brand, a wide product portfolio, an established distribution network, and robust research and development capability have enabled the company to consolidate its position as the leader in the Indian cigarettes market, the brokerage firm pointed out. Over the past 10 years the company has maintained a dividend payout of over 50 percent, currently yielding to 4.39 percent. Its dividend track record has been high and consistent making it a very good dividend bet.

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First Published:May 23, 2022 8:55 AM IST