ITC, Coal India, Power Grid, Linde India, Hero Moto, BPCL & HPCL: 7 high-dividend paying stocks for 2023

A handful of brokerages have recommended shares of seven high-dividend paying companies, which can deliver decent returns in 2023. They are ITC, Coal India, Power Grid, BPCL, Linde India, Hero MotoCorp and HPCL. Among these stocks, ITC and Power Grid are two stocks, which has been recommended by more than two brokerages. Here's what analysts said on these stocks:  

ITC | Narendra Solanki,  Anand Rathi Shares & Stock Brokers

Narendra Solanki of Anand Rathi said the trajectory of inflation remains a key monitorable and that prospects of a favourable monsoon and the recent moderation in prices of key commodities along with proactive interventions by the government and RBI augur well for sustained economic recovery and a pick-up in consumption expenditure. Given the improving growth outlook and improvement in margin profiles in other businesses, Anand Rathi has increased EPS estimates for the company over FY23-24E.

“Solid dividend yield and cash flows coupled with receding capital allocation concerns should keep the sentiment positive on the stock. We reiterate our BUY rating with a revised TP of Rs 364 based on 23x FY24E earnings,” he said.

BPCL | Vinod Nair, Head of Research at Geojit Financial Services

Based on the prevailing market, BPCL's average dividend yield over the last five years has been around 9.3 per cent. Nair of Geojit Financial Services believes the current dividend yield trend will continue as the gross refining margin (GRM) came in higher due to an improvement in product mix. In addition, a decline in the crude price from its June peak will narrow the difference between the rate of imported crude and retail fuel prices.

"The government may potentially place reduced controls on retail fuel rates and low export duties in the coming quarters, which can boost BPCL’s performance in the short-to-medium-term," Nair said.

Coal India | Nirav Karkera, Head of Research, Fisdom

Coal India is among the state-owned energy undertakings with a rich dividend history. Nirav Karkera of Fisdom said Coal India may gain on the back of a combination of higher demand, increased output and improved pricing through realisations via the e-auction route.

Along with elevated coal prices, another tailwind to Coal India would be EU’s reducing dependency on Russian gas, which paves way for the next best alternative of coal, wherein Coal India is strongly positioned as a major producer, he said,

“At a current dividend yield of 7.6 per cent, and a strong track record of robust payout ratios, equity shares can be looked at with an expectation of steady, meaningful dividends with bright prospects of an upside through capital appreciation. Under favourable conditions, the stock is poised to appreciate to INR 325 a piece through the period,” Karkera said.

Linde India | Narendra Solanki, Anand Rathi Shares & Stock Brokers

Linde India is a leading industrial gases and engineering company in India. The gases and related products segment comprises of pipeline gas supplies (Onsite) to large industrial customers, mainly the primary steel, glass and chemical industries, supply of liquefied gases through Cryogenic tankers (Bulk) to cater to mid-size demands across a wide range of industrial sectors and compressed gas supply in cylinders (Packaged Gas) for meeting smaller demand for gases mainly across fabrication, manufacturing and construction industry.

“We believe that the company will benefit from the government thrust towards manufacturing, synergy benefit from JV and upcoming capacities. We recommend a BUY on the stock with a target price of Rs 3,800 per share,” Solanki said.

HPCL| Sunil Nyati, Managing Director at Swastika Investmart

Nyati Swastika Investmart said oil market companies (OMCs) are offering a favourable risk-reward opportunity after a painful period, as crude oil prices have stabilised, and that OMCs are likely to recover their losses in the coming quarters. There is valuation comfort with a high dividend yield, he said.

"With a target of Rs 300, HPCL is our preferred bet," is said.

Power Grid | | Vinod Nair, Head of Research at Geojit Financial Services

Power Grid operates in a growing energy transmission industry with substantial pipeline projects and execution capabilities. The government is planning to invest Rs 2.44 lakh crore to further strengthen the power transmission system against the backdrop of India’s goal of having 500GW of renewable energy by 2030. Additionally, the company has continued to improve balance sheet with a reduction of debt and increased its investments in renewable energy projects, Nair of Geojit Financial Services said.

"The company has a track record of rewarding investors with attractive dividends, with a 3-year average dividend yield of 5 per cent," he said.

Hero MotoCorp| Marc Despallieres, Chief Strategy & Trading Officer, Vantage

Despallieres likes both MotoCorp and ITC. Both companies are market leaders, and their management teams have a laser-sharp focus on their respective businesses, he said.

“They also have strong brands. This makes for an excellent combination.  The two firms we’ve recommended have dividend yields of over 3 per cent. If you’re looking for stocks that provide high dividends as well as the potential for capital appreciation, ITC and Hero MotoCorp should be high on your list,” he said.

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