Best Highest Dividend-Paying Penny Stocks to Invest in India 2024

In this article, we will discuss

• What are Penny Stocks?
• Advantages of Investing in Penny Stocks
• Risks Associated with Investing in Penny Stocks
• How to Identify Stocks that Pay High Dividends?
• Highest Dividend-Paying Penny Stocks to Invest in India 2024
• Factors to Consider When Investing in the Highest-Dividend Penny Stocks
• Conclusion

Investing in penny stocks can be an attractive and cost-effective wealth-creation opportunity. Contrary to popular opinion, penny stocks offer more than just capital appreciation. Some of them even distribute dividends regularly.

In this article, we are going to explore what penny stocks are, their advantages and disadvantages and some of the highest dividend-paying stocks you can consider investing in.

What are Penny Stocks?

Stocks of small companies that trade at low prices are often termed penny stocks. In the Indian context, penny stocks are the stocks that typically trade at or below Rs. 10 on the stock exchanges.

The key characteristics of penny stocks include low market capitalisation, limited liquidity and a high susceptibility to market volatility. Owing to their low price, penny stocks are accessible to a broader range of investors, including those with limited capital.

Advantages of Investing in Penny Stocks

Before we look at the list of highest-dividend penny stocks, let us quickly go through the various benefits you get to enjoy by investing in them.

• Low Initial Investment

Since the stock prices are very low and accessible, penny stocks enable you to start investing even if you have limited funds.

• High Growth Potential

Many penny stocks represent emerging companies with significant growth potential. Investing in them can enable you to capitalise on the wealth-creation potential they offer.

• Diversification

Adding penny stocks to your portfolio can help you diversify your investments and reduce overall risk.

• Potential for High Dividends

Although not all penny stocks pay dividends, some offer high dividend yields. These dividends can provide a steady income stream in addition to the capital gains you may experience from stock price appreciation.

Risks Associated with Investing in Penny Stocks

Despite the many advantages associated with penny stocks, investing in them does come with several risks. Understanding what they are can help you make better investment decisions. Here is a quick overview of some of the key risks associated with these stocks.

• High Volatility

Penny stocks can be extremely volatile. The sudden and rapid price fluctuations could potentially result in significant losses in a very short period.

• Limited Information

Getting access to information on penny stocks may not always be possible. This could make conducting thorough due diligence very challenging.

• Low Liquidity

The trading volumes of penny stocks are often very low. This can make purchasing and selling shares very difficult without compromising on the price.

• Stock Manipulation

Many penny stocks are susceptible to fraud and price manipulation through pump-and-dump schemes.

How to Identify Stocks that Pay High Dividends?

Before we head over to look at some of the best dividend stocks from the penny stock segment of the market, let us quickly address the mechanism for identifying stocks that pay high dividends.

The dividend yield is one of the many fundamental metrics that investors use to determine if a stock is paying high dividends. Dividend yield shows how much a company pays out as dividends each year relative to its stock price. It is usually expressed as a percentage and is calculated using the following mathematical formula.

Dividend Yield = (Annual Dividend Per Share ÷ Current Price Per Share) x 100

A high dividend yield essentially indicates that a company is returning a significant portion of its profits to its shareholders. For example, if the dividend yield of a company is 10%, it means that it has declared an annual dividend that is equal to 10% of its current share price.

Highest Dividend-Paying Penny Stocks to Invest in India 2024

Some of the best dividend-paying penny stocks in the descending order of dividend yield are listed in the table below, along with some other key fundamental metrics.

Note: All of the values in the table are valid as of May 22, 2024. 

• Taparia Tools Limited

Taparia Tools Limited started operations in India in 1969 as a manufacturer of an extensive range of industrial and consumer tools. The company’s product portfolio includes tool sets, wrenches, pliers, screwdrivers, hammers, spanners and measurement devices.

One of the many advantages that Taparia Tools has over its peers is cost-effectiveness. The company’s products are priced competitively, making them accessible to a wide range of customers. Taparia Tools Limited has two manufacturing facilities in Nashik and Goa, which employ more than 1,000 people. With a dividend yield of 3,629%, the company is among the highest dividend-paying stocks in India.

• IL&FS Investment Managers Limited

A subsidiary of Infrastructure Leasing & Financial Services Limited (IL&FS), IL&FS Investment Managers Limited is a leading private equity fund manager in India. The company has raised over $3.5 billion to date and invested in several key sectors of the economy, such as telecom, retail, media, shipyards, real estate, infrastructure and gas distribution, among others.

IL&FS Investment Managers Limited currently has nine active private equity funds with investments in over 44 different entities across various industries. In addition to providing capital to various entities, the company also offers several value-added services, such as IPO management, financial restructuring and debt syndication. A yield of 6.99% makes IL&FS Investment Managers Limited one of the best dividend stocks to invest in.

• M Lakhamsi Industries Limited

Established in 1985, M Lakhamsi Industries Limited is a large-scale exporter of Indian commodities. The company is involved in processing, packaging and exporting oil seeds, spices, oils, grains and 21 other products to more than 75 destinations outside the country.

In recognition of the company’s efforts, the Government of India has awarded it the distinction of Star Export House. M Lakhamsi Industries Limited’s manufacturing facilities are strategically located across India and are all ISO, Halal, Kosher and HACCP-certified. The company features on the high dividend stocks list owing to its stellar dividend yield of 3.42%. 

• Vivanta Industries Limited

Established in 2013, Vivanta Industries Limited is an emerging player in the Indian manufacturing sector. The company’s business verticals include drone and anti-drone services, agriculture, AI and robotics and E.V. charging stations.

It also provides a host of services, such as project conceptualisation, land survey and procurement, project design and engineering, project funding and turnkey projects. Vivanta Industries also offers warehousing and prefabricated homes.

• Vishwaraj Sugar Industries Limited

One of the many players in the Indian sugar industry, Vishwaraj Sugar Industries Limited, was incorporated in 1995 as an integrated manufacturer of sugar, molasses and sugarcane syrup. The company also generates power and has expanded its business to include the production of neutral spirits, rectified spirits, natural alcohol vinegar and ethanol. 

Vishwaraj Sugar Industries’ production facility is located in Belgaum, Karnataka, with a total sugar production capacity of 2.42 lakh metric tonnes. The company is not only among the highest-dividend penny stocks but is also one of the most consistent at distributing dividends to its shareholders.

• Comfort Intech Limited

Established in 1994, Comfort Intech Limited’s primary business vertical is the trading of goods on e-commerce platforms. In addition to trading an extensive range of goods, the company is also involved in the liquor manufacturing, bottling and distribution business. It specialises in manufacturing Indian-made foreign liquor. This has been made possible thanks to a strategic acquisition of Liquors India Limited (LIL), which is a distillery in Telangana.

Some of the key liquor brands that the company owns include Gold Mark Reserve, Deccan Blue, Gold Mark VSOP Brandy and Magnum Gold Premium. Furthermore, Comfort Intech Limited is also actively involved in investing and trading shares on stock exchanges. Being one of the highest dividend-paying stocks, the company has a strong and rich history of distributing dividends to its shareholders.

• Family Care Hospitals Limited

Family Care Hospitals Limited is a healthcare services provider based in Thane, Maharashtra. Known for its commitment to patient care and clinical excellence, the company offers a wide range of healthcare services across different branches of medicine.

In addition to healthcare services, Family Care Hospitals Limited also offers video consultations, pharmaceutical services, lab testing, health checkup services and nursing services. The company also offers expert elective surgical care for a wide range of illnesses and medical conditions.

• Rajnandini Metal Limited

Rajnandini Metal Limited, one of the best dividend stocks in the penny stock category, was incorporated in 2010 as a manufacturer of metal products in India. The company is involved in the production of an extensive range of wires and cables, including copper rods, fine copper wire, annealed bare copper wire, bunched copper wire, submersible wires and flat cables.

The products manufactured by Rajnandini Metal Limited are used in various industries such as railways, automobiles and power generation and transmission, among others. In addition to copper, the company also focuses on brass, zinc, aluminium and other non-ferrous metals. Rajnandini Metal Limited is also planning to expand its manufacturing facility to produce MCB, MCB boxes, LED lighting and switch gears.

Factors to Consider When Investing in the Highest-Dividend Penny Stocks

Now that you have seen some of the best penny stocks offering dividends, let us check out the key things you need to keep in mind when investing in these companies.

• Financial Health

Since penny stocks are not exactly known to be fundamentally stable, financial health is the most important factor you must pay attention to when investing. You must thoroughly analyse the company's financial statements, including revenue, profit margins and debt levels. A financially healthy company is more likely to sustain its dividend payments.

• Dividend History

Before investing in high-dividend stocks, you must always check the dividend payment history. Ideally, the company must have a consistent history of paying dividends. This indicates financial stability and a commitment to returning profits to shareholders.

• Future Growth Prospects

Penny stocks that have good prospects are likely to continue paying dividends to shareholders in the long run. Therefore, you must look into possible growth opportunities that the companies can capitalise on.

• Dividend Payout Ratio

The dividend payout ratio is a financial metric representing the proportion of revenue paid out as dividends. Although a high ratio is desirable, it may not be sustainable in the long run. Instead, the dividend payout ratio must be balanced.

• Economic Conditions

Macroeconomic factors can impact dividend yields, especially for penny stocks, since they are very susceptible to these changes. Higher interest rates and inflation may make even the highest dividend-paying stocks seem less attractive.

Conclusion

Investing in some of the best dividend-paying penny stocks can be highly rewarding since you get the benefit of capital appreciation as well as the potential to receive regular income. However, it is important to note that penny stocks carry high risks due to their volatility and lower liquidity, making them suitable only for investors with a high tolerance for risk. That said, if you wish to still invest in these stocks, make sure to conduct thorough research and due diligence.

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