Equity investors seeking regular income, potential capital appreciation, and long-term compounding can consider adding dividend stocks to their portfolios, as they provide a stream of cash flow without requiring investors to sell their shares.
However, one shouldn't jump to buy a stock just because it has a high dividend yield, for it can sometimes be a warning sign rather than an opportunity. For example, if a stock price crashes over a certain period, but its dividend remains unchanged, its dividend yield will automatically rise.
The best thing is to focus on earnings visibility, cash flow generation, balance sheet strength, and the sustainability of payouts in a stock rather than just looking at headline dividend yields.
Seema Srivastava, Senior Research Analyst at SMC Global Securities, highlights five dividend stocks to consider.
ITC: Srivastava pointed out that ITC remains the strongest defensive dividend play.
"With a dividend yield of around 5%, the company benefits from strong cash generation, a dominant cigarette franchise and a diversified presence across FMCG, hotels, paperboards and agri businesses. Its relatively strong balance sheet and predictable cash flows provide good visibility for dividends. The key risk remains taxation and regulatory pressure on cigarettes," said Srivastava.
Coal India: Coal India offers an attractive combination of a high dividend yield, low valuation and strong cash generation.
Srivastava underscored that the recent market screens have placed its dividend yield in the 5–8% range, depending on the reference price and dividend period; the recent August 2026 screen cited an 8% yield and noted that Coal India had paid ₹31.9 per share over the preceding 12 months.
"Its dominant position in India's coal industry continues to support earnings, while relatively low financial leverage strengthens dividend sustainability. The key long-term concern is the energy transition towards renewables, although coal is expected to remain important for India's power requirements over the medium term," said Srivastava.
ONGC: ONGC provides approximately 5% dividend yield and trades at an inexpensive valuation, said Srivastava.
SMC Global's expert added that the current screening data show ONGC trading at around 6.8 times earnings and offeringa 5.15% dividend yield, with its latest quarterly profit rising more than 20% YoY.
"Its strategic position in India's domestic oil and gas production supports the business, but earnings remain sensitive to crude and gas prices. Hence, it offers attractive income but carries greater cyclicality than ITC or Coal India," said Srivastava.
Indian Oil Corporation: As per Srivastava, Indian Oil Corporation offers a high dividend yield, with recent screens showing a dividend yield of approximately 5.8%, while August screen cited around 7% supported by its large refining and fuel-marketing operations.
However, refining margins, crude prices, inventory gains/losses and government policies can cause significant earnings volatility. Therefore, its dividend visibility is somewhat lower, added Srivastava.
Vedanta: As per Srivastava, Vedanta stands out for its exceptionally high dividend yield.
