For Indian retail investors seeking reliable income alongside growth, public sector undertaking (PSU) stocks have emerged as a compelling proposition. These government-backed companies are not only rewarding shareholders with consistent and attractive dividends but have also delivered substantial capital gains over the past few years, offering a dual advantage.
PSU Stocks: A Dual Engine of Returns
The financial appeal of PSU stocks is underscored by the remarkable performance of the BSE PSU index, which has surged by 240% in the last five years. This impressive rally is attributed to improved financials, government-led reforms, policy support, and valuations that were historically attractive compared to private sector peers.
What makes the story even more enticing for income-focused investors is the dividend yield. A recent analysis by Axis Direct reveals that in the last year, many leading PSU stocks have offered a dividend yield as high as 7%. This comfortably exceeds the returns from one-year fixed deposits with the State Bank of India, which currently range between 5.9% and 6.25%. Furthermore, a significant number of these high-yield stocks are priced below ₹500 per share, enhancing their accessibility.
Understanding Dividend Yield and Key PSU Performers
Dividend yield is a critical metric calculated as the annual dividend per share divided by the stock's current market price, expressed as a percentage. It is a primary tool for investors prioritizing regular income. However, experts caution that a high yield alone is not a definitive sign of health; it must be evaluated alongside the company's fundamental strength and earnings sustainability. A yield of 5% or more is generally considered attractive, provided the payout is sustainable.
According to the Axis Direct report, the highest dividend-paying PSUs are predominantly from the oil & gas and financial sectors. The standout performer is Coal India Limited, which led the pack with a dividend yield of 7%, having paid ₹26.5 per share over the past twelve months. It was closely followed by REC Limited with a 6% yield, backed by a ₹19.7 per share dividend.
Four other companies—ONGC, Power Finance Corporation (PFC), BPCL, and Balmer Lawrie & Co.—each provided a dividend yield of 5%. In terms of the absolute dividend amount paid per share, BPCL was at the forefront, distributing ₹17.5, followed by ONGC (₹12.3), PFC (₹16.4), and Balmer Lawrie (₹8.5).
A Broader Look at High-Yield PSU Opportunities
The list of consistent dividend payers extends beyond these top names. Companies like GAIL (India), Shipping Corporation of India, NMDC, and National Aluminium Company (NALCO) have each offered a dividend yield of 4%. Meanwhile, RITES, Power Grid Corporation, HPCL, Union Bank of India, and Oil India have provided yields of 3%, with dividends ranging from ₹4.8 to ₹12 per share.
This trend highlights a significant shift in the perception of PSU stocks, transforming them from conservative, slow-moving investments into dynamic vehicles offering both growth and income. For investors, this presents an opportunity to diversify their portfolio with assets that have shown resilience and a commitment to sharing profits with shareholders.
Disclaimer: This information is for educational purposes only. The views are from individual analysts. Investors are strongly advised to consult certified experts before making any investment decisions, as market conditions are subject to change.
