Are you on the lookout for high-yielding investments? Look no further than stocks that could be announcing big dividends this year.
The dividend season is almost here…in a month or so, companies might start declaring final dividend for the financial year 2023.
Earlier this week, we wrote about the smallcaps that could announce big dividends this year. Today, we’ll focus on penny stocks.
While penny stocks may seem risky, there are some companies which maintain their dividend payout ratios and have strong financials to back them.
As investors search for reliable sources of income in uncertainty, we’ve scoured the market to bring you our top penny stock picks that have a proven track record of maintaining a high dividend payout ratio.
These companies have negligible debt, have reported profits in all three quarters of FY23, and have a track record of paying out dividends.
#1 Ador Fontech
The first company on the list of high dividend paying penny stocks is Ador Fontech.
The company started off as a repair welding service provider and later diversified into other segments, such as value-added reclamation, fusion, surfacing, and spraying.
Ador Fontech also manufactures and sells products such as low-heat input alloys, solid and flux-cored wires, and welding and cutting equipment.
So, why does Ador Fontech make it to the list?
Well, the company’s five year average dividend payout ratio stands out compared to the other penny stocks in the market.
Ador Fontech’s five-year payout comes to 54.8% with an average payout per share of Rs 2.9 per year.
Ador Fontech Dividend History (2018-2022)
For the first three quarters of financial year 2023, Ador Fontech has remained profitable and reported a profit of Rs 167 million (m). There’s one more quarter to go before the year ends.
In financial year 2022, the company made a profit of Rs 254 m on sales of Rs 2,050 m.
With zero debt on its books and quarterly EPS on the rise, Ador Fontech could possibly declare a higher payout per share compared to the previous year.
We recently wrote this about Ador Fontech in one of the editorials:
Ador Fontech is currently a debt-free company with healthy liquidity and an interest coverage ratio of 96.7x. The return on equity (RoE) for 2022 improved from 9.2% to 17.4% due to improved profitability.
Going forward, the company’s continuous efforts to update and upgrade its welding techniques and materials will drive growth.
You can check the entire thing here: 5 Penny Stocks Set to Grow Dramatically in 2023.
#2 Geojit Financial Services
Second company on this list is Geojit Financial Services.
Geojit Financial Services is the flagship company of the Geojit group. It operates as an investment services company in India headquartered in Kochi, Kerala.
It was the first company in India to launch online-trading facilities, develop franchise models of sub-broking, form joint ventures in west Asia, and the first to begin commodity futures trading in pepper, cardamom, gold, and silver in India.
The product offerings of the company include equities and derivatives to mutual funds, life and general insurance, commodities derivatives, and portfolio management services.
Geojit Financial’s five year average dividend payout ratio comes to 77.1%, which is also the highest among the five stocks highlighted in this article.
Have a look at the table below:
For the first three quarters of financial year 2023, Geojit has remained profitable and reported a profit of Rs 660 m.
In financial year 2022, the company made a profit of Rs 1,429 m on sales of around Rs 5,000 m.
For the six month period till September 2022, the company reported a decline in profit due to lower market volumes in retail cash segment.
In the broking segment, there’s intense competition and established players like Angel Broking are also seeing this impact their business. For this reason, Geojit may post flat or marginal growth in profit this year as compared to last year.
To reduce dependence on the income generated from broking segment, the company is looking to get into the distribution business.
#3 Radix Industries
Third on this list is Radix Industries.
Formerly known as Ragson Petrochem, Radix Industries was earlier involved in bottling of LPG and supplying to both domestic and commercial use.
In 2011, it was acquired by the promoters of Arqube Industries. Post-acquisition, the line of business changed from storage and marketing of gas to export of human hair, wigs, and its related products.
Why does Radix make it to the list? The company’s five year average dividend payout ratio comes to 65.2% with an average payout per share of Rs 0.7 per year.
The dividend payout ratio has reduced consistently over the past few years. But this year could be different.
For the first three quarters, the company has reported a combined profit of Rs 11 million (m) as compared to 2022’s full year profit of Rs 15 m.
With earnings per share (EPS) on the rise for the past three quarters, the company could post decent results in the last quarter which could result in higher payout compared to previous year.
The company’s debt to equity stands at 0.47x, so it could also choose to declare the same payout as last year and pare debt.
#4 Sicagen India
Next on the list is Sicagen India.
Part of the AM International group, Sicagen India operates in several segments including trading of building materials, sales & servicing power & controls systems, manufacturing of MS barrels and water treatment chemicals.
ABB, Ashok Leyland, Blue Star, Cipla, Dr Reddy’s Lab are some of its clients.
Why does Sicagen India make it to the list? The company’s five year average dividend payout ratio comes to 68.2% with an average payout per share of Rs 0.5 per year.
Sicagen India Dividend History (2018-2022)
Here’s where it gets interesting…for the first three quarters of FY23, the company has reported a combined net profit of Rs 65 m. This compares with full year profit of Rs 10.1 m reported last year.
With almost zero debt on its balance sheet, the company could possibly announce higher payout per share this year.
In 2022, the company reported a spurt in sales volume. This year on a TTM basis, the company has already reported higher sales compared to previous year. Profitability is expected to improve further on the back of capacity utilisation.
#5 Menon Bearings
Last on this list is Menon Bearings.
Incorporated in 1991, Menon Bearings manufactures auto components such as bearings, bushes, thrust washers and bi-metal strips at its manufacturing facilities. It also manufactures aluminum die-cast products.
The Tata group, Eicher Motors, Honeywell, Cummins India among other prominent names, are some of its clients.
As part of its diversification strategy, Menon Bearings is starting a new production line in the auto component segment – eco-antifriction (asbestos free) materials to begin with products like brake lining, brake shoes, etc.
Menon Bearings’ five-year average dividend payout ratio comes to 52%. Its payout per share comes to Rs 1.8 per year.
Have a look at the table below:
For financial year 2023, the company has already paid out a dividend of Rs 2 per share in July 2022. It could possibly declare a final dividend too, going by the profits it has reported for the first three quarters of FY23.
In FY22, the company made a profit of Rs 244 m. The combined profit for the first three quarters of 2023 has already surpassed last year’s figures and stands at Rs 234 m.
As far as debt is concerned, the company doesn’t have any immediate payments due and its debt to equity stands at 0.2x.
On the diversification front, the company has said that trial production is completed and it has received safety certifications. It will start commercial production in the first quarter of FY24.
Investing in high dividend payout penny stocks
As we all know, investing in penny stocks can be a risky game, but if you do your research and choose wisely, the rewards can be well worth it.
These five penny stocks, which have the potential to announce big dividends this year, should be on the radar of any investor looking to add some potential growth to their portfolio.
It’s a powerful and flexible tool which allows you to run your own custom queries.
Here’s a snapshot showing the list of high dividend payout stocks on Equitymaster’s stock screener.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Featured Video Of The Day
Worst Week For Markets In Over 6 Months