Three stocks paying quarterly dividends. Add them to your watchlist

Similarly, when an investor is stuck in a wild, volatile and turbulent market period his only hope is a consistent dividend-paying stock.

In times when an investor cannot be sure of capital appreciation; dividend-paying stocks offer stability and certainty.

Here are three such fundamentally strong companies that pay quarterly dividends.

Here’s how they are stacked up for the near future.

Read on to know more…

#1 Tata Consultancy Services (TCS)

The first company on our list is TCS.

TCS is a bright shining star in the galaxy ofTata group companies. The company is an Indian multinational information technology services and consulting company with its headquarters in Mumbai.

TCS has consistently paid a dividend since its listing. Since 2004, the company has paid 80 dividends in total.

Ever since 2005, the company has paid dividends at the end of every single quarter.

For the financial year 2022-23, TCS has paid interim and special dividends of ₹91 so far. It is yet to declare its final dividend for the said year.

The five-year average dividend payout ratio stands at 48.2%. The dividend yield over the past five years has averaged 1.9%.

Lately, IT companieshave been in trouble because of global headwinds for IT companies. However, the company still managed to pay dividends because of its deep pockets.

Being a cash-rich company, TCS had cash and cash equivalents of ₹89.3 bn and a free cash flow of ₹102.2 bn as of the December 2022 quarter.

Considering the company’s hefty pockets, it may soon announce big dividends along with quarterly results. The market expects TCS to kick start the season of quarterly results by declaring quarterly results on 12 April 2023.

The board of directors of the company may issue the final dividend for the year on the same date.

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#2 HCL Technologies

The second name on our list is another IT company, HCL Technologies.

HCL Technologies (formerly Hindustan Computers Limited), is an Indian multinational information technology services and consulting company headquartered in Noida. It emerged as an independent company in 1991 when HCL entered into the software services business.

This IT company has a knack for declaring big consecutive dividends. Since 2006, the company has declared 85 dividends in total.

Ever since the financial year 2013-14, the company has paid dividends consistently during all quarters and the last quarter of the last financial year is no exception.

It has already announced that it will declare results on 19 April 2023 or 20 April 2023. The record date for the same was 28 April 2023.

For the financial year 2022-23, the company has paid an interim dividend of ₹30 so far on the back of a 9.6% YoY increase in revenue and the highest-ever operational profits. HCL Software delivered strong growth, ahead of expectations on seasonality.

The five-year average dividend payout ratio stands at 32.6%. The dividend yield over the past five years has averaged 1.8%.

At the end of the December 2022 quarter, the company had cash and cash equivalent of ₹66.5 bn and a free cash flow of ₹43.4 bn.

Considering the company’s cash-heavy pockets and bright growth pockets HCL Technologies is all set to pay a hefty dividend for the last quarter.

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#3 Nestle India

The last company on our list is the FMCG major Nestle India.

Nestle India is the Indian subsidiary of Nestle which is a Swiss multinational company. The company is headquartered in Gurgaon, Haryana. The company’s products include food, beverages, chocolate, and confectioneries.

The company has been paying frequent dividends. Since 1997, the company has paid 73 dividends in total.

Nestle India paid dividends consecutively for all quarters from the financial year 2016-17 to the financial year 2019-20. However, in 2019-20, the company suffered heavily due to pandemic-led lockdowns and ever since then the company faced rough times.

Increasing inflationary pressures, a dull macroeconomic environment, rising interest rates, etc. created margin pressure on the company. Hence, in the last two financial years, the company paid three-quarters out of four.

For the financial year 2022-23, Nestle India paid a hefty dividend of ₹220 because of improving quarterly profits and bright growth plans.

The five-year average dividend payout ratio stands at 101.8%. Thedividend yieldover the past five years has averaged 1.3%.

The company is well stacked up for growth in the long term. The key growth drivers will be sustained expansion in rural reach, capacity increase in Maggi and confectionary, and huge scope of growth in segments like coffee, ready-to-drink and chocolates.

Along with this, the company has cash and cash equivalents of ₹9.3 bn as of the end of the financial year 2022. The company follows January to December calendar year.

Hence, keeping in sight improving financials, sound growth potential, and deep pockets the company may soon be back to declaring dividends for all four quarters.

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Investment Takeaway

Dividend paying stocks offer stable income in an uncertain period. Hence, dividend stocks are like the lender of last resort for investors during volatile periods.

However, it is pertinent to note that when a company pays a dividend it is distributing the amount of money it could have invested back in the business.

Hence, dividend paying stocks offer stable income but they reduce essentially reduce capital gain on stocks.

The father of investing, Benjamin Graham also believes the same. He says, “The stockholder wants both income and appreciation, but in general the more he gets of one the less he realizes of the other.”

Hence, an investor should decide his investment goals before buying any stocks. Also conduct thorough research before making any investment decisions.

Happy investing!

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