In volatile markets, dividends offer something rare: predictability. For many investors, they’re a steady source of income amid the noise. While some chase gains from rising stock prices, other investors prefer the comfort of regular income through dividend paying stocks.
Public Sector Undertakings (PSUs) have long been a favourite among investors for this steady return. Backed by the government and known for consistent cash flows, PSUs like Coal India, ONGC, BPCL, and REC often lead the pack when it comes to dividend payouts.
Sectors like Metals & Mining (2.6%), Food & Beverages (2.4%), Oil & Gas (1.7%), and Banking & Finance (0.8%) currently offer the highest dividend yields.
For governments, dividends from public sector companies help fund everything from highways to healthcare. In FY24 alone, the Indian government received a hefty Rs 74,020 crore in dividend income. Now, to boost its non-tax revenue, it’s reportedly nudging Public Sector Undertakings (PSUs) to increase their payouts by nearly 25% by FY26.
The government is also urging private companies to be more generous with dividends. Arunish Chawla, Secretary of the Department of Investment and Public Asset Management, recently said, “We will also nudge private corporations to declare fair dividends for their minority shareholders so that together, we can make our stock market a more inclusive and rewarding space for the common investor.”
As the Q4FY25 earnings season is almost over, companies are announcing both results and corporate actions—bonus issues, stock splits, and dividends. In this edition of Chart of the Week, we will look into sectors and companies with the highest 1-year dividend yield over the past year. Dividend yield shows how much income investors earn from dividends compared to the current stock price.
Lower crude prices boost oil & gas dividends
The Oil and Gas sector is sensitive to crude oil price fluctuations, geopolitical tensions, economic policy shifts, and changes in global demand. Despite this, oil and gas companies maintained stable margins and cost control in the past year.
In FY25, the sector delivered a dividend yield of 1.7%. Leading the pack, Chennai Petroleum Corporation, Castrol India, and Oil and Natural Gas Corporation reported yields of 8.4%, 5.9%, and 5.7%, respectively. However, it is important to note that four of the six companies’ share prices have fallen in the past year.
Bharat Petroleum Corporation's dividend yield increased by 50 basis points to 4.9% in FY25. The company’s margins rose, supported by crude oil prices falling to $60, and the Organization of the Petroleum Exporting Countries (OPEC+) plans to increase output. Both factors boosted profitability and dividends, while its share price remained flat over the past year.
Castrol India holds a 38.7% share in the four-wheeler lubricant market. It raised its dividend from Rs 5.5 in FY20 to Rs 13 in FY25, translating to a 6.6% yield at the current market price. In FY25, net profit rose 7.3%, driven by growth in the automotive lubricants segment and stronger rural demand, and its stock price is up 13% over the past year.
The company distributes 85% of its profits as dividends. Its lubricants business requires low capital investment, and steady demand from automotive and industrial segments allows it to return surplus profit to shareholders.
Chennai Petroleum Corporation, a subsidiary of Indian Oil Corporation, also maintains a strong dividend track record. The company raised its dividend from Rs 2 in FY22 to Rs 55 in FY25, fueled by higher profits.
However, in FY25, its operating margin fell and gross refining margins dropped to 51.2% due to weaker refining margins. Revenue declined 10% and net profit fell 92.2% due to inventory losses and rising debt. These factors contributed to a 29% decline in share price over the past year.
ITC dividend yield rises as it demerges its hotel business
Food, Beverages & Tobacco company ITC announced its highest dividend in five years at Rs 21.8 per share for FY25. Revenue grew 5.7%, driven by growth in the agri-business and tobacco segments. Profit surged 69.8%, mainly due to exceptional income from the demerger of ITC’s hotel business.
Despite this, the company’s share price declined 2.5% over the past year following British American Tobacco’s sale of a 2.5% stake and weak growth in the paperboards and FMCG segments. By FY26, the company expects to generate Rs 2,350 crore in export revenue from nicotine and its derivatives.
In FY25, the company distributed 50.7% of its profit as dividends, driven by strong cash flows, stable profit margins from its tobacco business, and low capital expenditure needs. With limited reinvestment requirements, ITC returns surplus cash to shareholders through dividends.
HCL, Infosys lead dividend rally in the IT sector
The trends appear similar among software and services companies that generate steady cash flow and incur relatively lower capital expenditures. With limited opportunities for reinvestment and expansion compared to other sectors, large-cap firms such as HCL Technologies, Infosys, Tata Consultancy Services, Tech Mahindra, and LTIMindtree prioritise rewarding shareholders through dividends. All three stocks saw share price gains in the past year.
HCL Technologies, the third-largest Information Technology (IT) company by market capitalization, has a dividend yield of 3.6%, and its share price increased by 23.2% over the past year. In FY25, the company paid an interim dividend of Rs 12 per share to mark 25 years of listing in January 2025. The total dividend for the 12 months stood at Rs 60 per share.
The company distributed 95.2% of its net income as dividends, and the total dividend paid increased by 13.3% in FY25, supported by higher profits and strong operating cash flows.
In FY25, Infosys declared its highest dividend in nearly a decade of Rs 71 per share, delivering a dividend yield of 2.7%. This performance was driven by a higher free cash flow of Rs 33,918 crore, up 41.8% YoY, and amid moderate guidance for FY26, its stock has gained 10% over the past year.
Oracle Financial Services Software reported a dividend per share of Rs 265, driven by a 7.2% rise in profit and double-digit revenue growth in its license and cloud segment. Its share price also gained 11.5% over the last year.
Vedanta shifts gears: cuts dividend to fund expansion and reduce debt
The Metals and Mining sector has a dividend yield of 2.6%. Vedanta, Coal India, and NMDC have the highest dividend payouts in this sector, with yields of 7.4%, 6.7%, and 3.9%, respectively. However, all three companies’ share prices have declined in the past year.
Vedanta, India’s only nickel producer, has declared a dividend of Rs 43.5 per share for FY25, down from Rs 50 in FY24. Its share price has declined 3.6% over the year. Analysts at Citi expect the dividend to drop to Rs 34 in FY26, as the company retains cash for the demerger and semiconductor projects.
In FY26, the company plans to reduce its debt by $0.6 billion and invest between $1.5 billion and $1.7 billion in its aluminum, zinc, and oil and gas businesses. Ajay Goel, Vedanta's Group CFO, notes, “We are eyeing a 20% uptick in profitability in FY26, driven by a combination of higher volumes and improved cost efficiencies.”
Coal India accounts for 80% of India’s coal production in FY25 and has a dividend yield of 6.6%, with the company paying out 46% of its profit as dividends. The company’s revenue has grown at a CAGR of 16.2% over the past five years, while net profit rose 8.4%. Coal India plans to develop 36 new coal mining projects to boost production capacity in the next five years.
Over the past year, Coal India faced lower sales volumes and earnings due to weak global coal prices and slower demand from the power sector. These factors pushed its share price down by 20.3%.
National Aluminium Company (NALCO) raised its dividend payout to Rs 10 in FY25, driven by a 164% jump in profit due to higher alumina prices and increased export volumes to Southeast Asia and the Middle East.
However, alumina price volatility and weaker demand from China have squeezed NALCO’s profit margins, causing its share price to drop 4.7% over the past year despite strong earnings growth.
Meanwhile, the banking and financial services sector had an overall dividend yield of 0.8% in FY25. The top dividend payers in this sector are REC, UTI Asset Management Company, and Power Finance Corporation, with yields of 5%, 4%, and 3.9%, respectively.
