‘The dividend is a signal that the company is confident in its ability to generate cash and wants to share that with its shareholders.’
– Warren Buffett
In the world of investing, dividend-paying stocks are often seen as a reliable source of income, especially for those seeking stability and steady returns.
Public Sector Undertakings (PSUs) in India have long been considered attractive options for dividend investors due to their strong government backing and consistent performance.
As we look back at FY25, several PSU stocks stand out for their high dividend payments, making them a compelling choice for income-focused investors.
Considering this, we applied for a screener to identify the PSU stocks which paid the highest dividend in FY25, and which show promising prospects for the future.
So, let’s look at the four highest dividend paying PSU stocks, and the outlook for these stocks going forward.
#1 Coal India Ltd (CIL)
First on this list is Coal India.
Coal India is engaged in the mining and production of coal and operates coal washeries.
It contributes over 80% of India’s total coal production, supplying coal to power plants, steel industries, and other sectors.
The company was the highest dividend paying PSU in FY25, having distributed Rs 102.5 billion (bn).
The company’s revenue has grown at a CAGR of 11.1% in the last five years while its net profit has grown at a CAGR of 8.5%.
The company’s five-year average return on equity (RoE) and return on capital employed (RoCE) were 73.7% and 74.7%, respectively.
Its debt-to-equity ratio was 0.1 as of 31 March 2024.
CIL plans to develop 36 new coal mining projects over the next five years to increase its production capacity and meet the nation’s growing energy demands.
Going forward, the company is setting up 3,000 megawatts (MW) of solar power capacity by 2027-28, with further plans to add another 2,000 MW.
Additionally, CIL plans to invest about Rs 670 billion (bn) in constructing coal-fired power plants near its coal mines, primarily in Odisha. Approvals have been secured for 4.7 gigawatts (GW) of generation capacity over the next six to seven years, with an additional 2 GW under discussion.
To improve coal evacuation, the company is developing the National Coal Logistic Plan, which includes first mile connectivity through railway sidings near coal mines and strengthening the rail network in coalfields.
#2 Oil and Natural Gas Corporation (ONGC)
Second on this list is ONGC.
ONGC is India’s largest oil and gas exploration and production company.
The company is also involved in upstream, midstream, and downstream operations, including refining and petrochemicals.
It is responsible for over 70% of India’s crude oil and 80% of its natural gas production.
The company distributed Rs 100 bn in dividends during FY25.
Coming to the financials, the company’s revenue has grown at a CAGR of 3.4% in the last five years while its net profit has grown at a CAGR of 8.7%.
The company’s five-year average RoE and RoCE were 12.2% and 15.9%, respectively.
Its debt-to-equity ratio was 0.4 as of 31 March 2024.
The company plans to spend Rs 369.2 bn in FY26 focusing on the exploration, drilling, capital & integration projects.
Going forward, ONGC aims to double its domestic exploration and production licensed area to 500,000 sq. km. over the next five years, by spending an additional Rs 100 bn every year.
Additionally, the company is committed to investing approximately Rs 1 trillion (tn) (about US$ 11.5 bn) in developing a renewable energy portfolio of 10 GW by 2030. This includes investments in solar, wind, and green hydrogen projects.
ONGC plans to enter the regasified liquefied natural gas (R-LNG) market and is seeking partnerships to build very large ethane carriers (VLECs) to transport feedstock to its petrochemical plants.
#3 Hindustan Zinc Ltd (HZL)
Next on this list is Hindustan Zinc.
HZL is India’s largest and the world’s second-largest integrated zinc producer.
After successive dilution of stake by the government over the years, the company is now a subsidiary of Vedanta Limited. However, the government of India is the largest minority shareholder.
HZL is a leading producer of zinc, lead, and silver, with mining operations primarily in Rajasthan.
It supplies essential materials for infrastructure, automotive, and industrial applications.
The company distributed Rs 42.3 bn in dividends during FY25.
The company’s revenue has grown at a CAGR of 6.5% in the last five years.
The company’s five-year average RoE and RoCE, were 33.8% and 36.6%, respectively.
Its debt-to-equity ratio was 0.6 as of 31 March 2024.
Hindustan Zinc is evaluating the idea to create separate legal entities for undertaking the zinc & lead, silver, and recycling business of the company for unlocking potential value.
To increase metal production to 2 million tonnes per annum (MTPA) within the next five years, the company will be investing about US$ 2.5 bn.
Hindustan Zinc plans to bid for domestic blocks containing minerals like copper, lithium, gold, platinum, and potash. It will do this to diversify product portfolio and support the energy transition.
The company is going to initiate a 10 million ton mine tailing recycling project to enhance sustainability and recover additional zinc.
#4 Bharat Petroleum Corporation Ltd (BPCL)
Last on this list is BPCL.
BPCL is an oil and gas company.
It operates in refining, marketing, and distribution of petroleum products, with major refineries in Mumbai, Kochi, and Bina.
The company distributed Rs 35.6 bn in dividends during FY25.
The company’s revenue has grown at a CAGR of 8.6% in the last five years while its net profit has grown at a CAGR of 30.2%.
The company’s five-year average RoE and RoCE were 23.8% and 21.4%, respectively.
Its debt-to-equity ratio was 0.6 as of 31 March 2024.
BPCL plans to invest approximately Rs 1.7 tn over the next five years. This investment aims to enhance oil refining and fuel marketing businesses, while also venturing into petrochemical and green energy sectors.
Additionally, the company is exploring the establishment of a new refinery-cum-petrochemical complex in Andhra Pradesh, with an estimated investment of US$ 11 bn. The proposed refinery is expected to have a capacity of at least 9 MMTPA, aiming to meet the rising energy demand and position India as a refining hub.
Going forward, BPCL aims to build 10 GW of renewable energy capacity by 2035, as part of its commitment to sustainable energy solutions.
Conclusion
Investing in high dividend-paying PSU stocks can provide a steady income stream, particularly for conservative investors looking for stability and low risk.
The companies mentioned in this article offer attractive dividend payments along with strong fundamentals, backed by the reliability of government ownership.
While dividends can be a sign of financial health, it’s essential to also consider other factors like growth potential and market conditions before making investment decisions.
Going forward, these PSU stocks are well-positioned to offer solid returns to income-focused investors, making them worthy of attention in a diversified portfolio.
Investors should evaluate the company’s fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.
Happy Investing.
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