Fixed deposits have been a preferred choice for passive income, offering stability and assured returns.
However, with interest rates typically ranging between 5% and 7%, FD returns often struggle to beat inflation. This is where dividend-paying stocks can offer an attractive alternative.
While equities carry market risks, carefully selected dividend stocks can create regular income and give capital appreciation.
In addition, dividend-paying stocks can also be used for portfolio diversification. They are seen as reliable & relatively safe bets during market corrections, providing stability.
The recent market correction has underscored the importance of holding fundamentally strong companies that continue to reward investors through steady payouts.
For investors seeking a balance between safety and growth, we have identified five dividend-paying stocks that can serve as a compelling alternative to fixed deposits.
Let’s take a closer look.
#1 Chennai Petroleum Corporation
First on the list is Chennai Petroleum Corporation.
Chennai Petroleum is a subsidiary of Indian Oil, which holds a majority stake of 51.9% in the company.
It currently operates 10.5 million metric tonnes per annum (MMTPA) refinery capacity.
The company manufactures petroleum products, lubricants and additives. In addition, it also produces high-quality feedstock such as propylene, superior kerosene, butylene, naphtha, paraffin wax, and sulfur.
It enjoys significant operating leverage due to its association with Indian Oil, which buys 90% of Chennai Petroleum’s output.
It’s a recent entrant into the dividend-paying stocks club, and its stellar financial and share price performance have contributed to its success.
The company has paid an average dividend of Rs 28 per share in the last three years with a dividend payout ratio of 14.5%.
In FY24, it paid a final dividend of Rs 55, which translates into a yield of 9.6%.
The company only announces a final dividend, so the FY25 dividend will be declared in a couple of months.
Looking ahead, the company is setting up a 9 MMTPA refinery project in a joint venture with the parent company IOCL, estimated to cost Rs 364.5 billion (bn).
With improving financial performance, the company’s annual cash generation is expected to be around Rs 10-15 bn.
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