Stocks in India for compounding growth from dividends

 Hi friends & investors

list of some good company's giving very good & consistent return from long time lets understand first what is dividend  

 a divided is a distribution portion of a company's earning decided by the board of directors to a class of its share holders dividend can be used as cash payment  as shares of stock or other property 

Why are dividends good?

Suppose you are a long-term investor. You have invested in the stocks of a company for the next 15-20 years. Now, if the company does not give any dividends, there is no way for you to make money until you sell the stocks. On the other hand, even though your investments might be growing, however, you won’t receive any cash in the hand unless you sell.

if the company gives a regular dividend, say 3-4% a year, then you can are receiving some returns from your investments. Here, your capital is growing as you’ve not sold your stocks. Along with it, you’re also receiving some dividends being a loyal shareholder of the company.

An entity that has given a consistent (moreover growing) dividend to its shareholders for the last 5-10 consecutive years, can be considered a financially strong company.

The companies that give irregular dividends (or skips dividends in a bad economy or market crashes) can not be considered as a financially sound company.

Now that we have understood the basics of dividends, let us learn a few of the important financial terms that are frequently used while analyzing dividends (before we look into the best dividend stocks in India).

Must know financial terms regarding Dividends

Here are a few terms that every dividend investor should know. These key terms are frequently used while discussing dividend stocks.

1. Dividend yield: A stock’s dividend yield is calculated as the company’s annual cash dividend per share divided by the current share price. It is expressed in annual percentage.

DIVIDEND YIELD =( DIVIDEND PER SHARE / DIVIDED PER SHARE ) X 100

2 .For example, if the share price of a company is Rs 100 and it gave a dividend of Rs 5 this year, then the dividend yield will be 5%. 

3. Payout ratio: It is the ratio of earnings paid out as dividends to shareholders divided by the total earnings by the company in that year. Dividend payout ratio typically expressed as a percentage and is calculated as follows:

Payout Ratio = Dividends per Share (DPS) / Earnings per Share (EPS)

As a thumb rule, avoid investing in companies with a very high dividend payout ratio. This is because a high payout ratio means the company is not retaining enough money for its expansion or growth. In other words, be cautionary if the payout ratio is greater than 70%.

if you are looking for a good dividend stock to invest, search for companies with growing dividends, steady dividend yield, and consistent payout ratio. Now, let us move further and discuss the list of ten Best Dividend Stocks in India

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