10 high-dividend yield stocks for value investing outperformance

India is witnessing a major foreign institutional investor (FII) selling among peer nations and InCred Equities is cautious. The domestic brokerage said it prefers large cap stocks and within that value over growth investing. It likes Hero MotoCorp Ltd, GAIL Ltd, ONGC, Petronet LNG, Shriram Finance, UTI AMC Ltd and Dr Reddy's Laboratories, among others, within this pack. HCL Technologies, Mahindra & Mahindra Financial Ltd and Wipro Ltd are three other high-dividend yield stocks that InCred Equities likes.  
 
The sustained market correction from the mid-September 2024 peak eased Nifty’s valuation to below the 10-year mean level of 20 time one-year forward EPS. Real earnings yield improved to the positive territory for the first time since the Covid-19 pandemic, thus limiting the downside, the brokerage said.

"However, the acceleration of consensus EPS cuts of late raises credibility of early-teen growth projections for FY26F27F. Value-based themes to prevail, where we prefer high dividend yield stocks," the brokerage said.

With local and global macro challenges in the short term, InCred Equities has cut its FY26 bull-case probability to 5 per cent (from 10 per cent earlier) and raised its bear-case probability to 45 per cent (from 40 per cent).

Building in Nifty Bloomberg consensus EPS cut, it has reduced the blended Nifty target marginally to 22,850, an upside of 2 per cent, by the end of Mar 2026.

"In a bear-case scenario, we maintain an 8 per cent downside from current levels. We continue to prefer large-cap stocks, where we have introduced Adani Ports and Special Economic Zone, Bajaj Auto, Marico, and Shriram Finance into our high-conviction list, along with Ethos in the mid-cap space. Making use of improved valuations, we have upgraded stocks in the 5:1 ratio in recent weeks," the brokerage said.

Here's what it said on the above 5 stocks: 
Adani Ports: There is visibility on volume growth, and the stock trades at an attractive valuation after a 23 per cent decline in its price in the last six months.

Bajaj Auto: The company has consistently demonstrated Ebitda margin neutrality from electric vehicle or EV transition, despite EVs rising in its domestic product mix from 3 per cent in 2QFY24 to almost 12% currently, which is impressive.

Ethos: The management strategy shift to focus on super premium watches to drive its Ebitda margin and profitability.

Marico: Among the first to make efforts to alleviate inter-channel conflicts due to aggressive scale-up of quick commerce and make steady progress towards its slated diversification agenda, with a strong focus on the foods segment.

Shriram Finance: Diversified AUM mix (rising non-vehicle loans) and improved underwriting/collection provide asset quality comfort.