Investors face a similar dilemma when selecting stocks. They can either choose stocks that offer steady and consistent returns but moderate growth. Or chase high-growth stocks that yield massive returns but only sporadically and with higher risks.
History has shown that stocks providing consistent returns often generate solid long-term profits for investors. Typically, such companies reward investors well. Be it through dividends or buybacks. Not surprisingly, there is a natural appeal for investing in dividend stocks.
Besides offering consistent returns to investors, dividend-paying stocks tend to provide a cushion during a market downturn.
Dividend stocks, especially those growing their payouts, are ideally suited for long-term investors, who prioritize stable returns over volatile returns.
Today, we take a look at three stocks that have doubled their dividend payouts over the last five years.
Coal India is a Maharana public sector undertaking (PSU) headquartered in Kolkata. It is the largest government-owned coal producer in the world and accounts for around 82% of the country’s total coal production.
The PSU is a very popular name among dividend stock investors. Like most PSUs, Coal India also has a long-standing history of paying dividends. In the past 14 years, it has paid dividends 27 times.
The company’s commitment to shareholders is evident in its generous dividend policy. Over the past five years, the dividend per share has doubled, reaching ₹25.5 per share in 2023-24 from ₹12 in 2019-20.
Here’s a summary of the company’s dividend payouts in the past five years.
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The increasing dividend payments were the result of the company’s profits growing over the years.
Driven by the surge in coal demand, its revenues grew by 8.2% in the last five years on a compound annual growth rate (CAGR) basis. On the other hand, its profit grew even quicker, thanks to cost optimization strategies. In the past five years, Coal India’s net profit grew by 17.5% on a CAGR basis.
Here’s a summary of the company’s financial performance over the last five years.
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The management expects coal to continue to dominate the energy market in the near future. It believes that coal will continue to be a forerunner in meeting India’s primary commercial energy needs, a position that will not be challenged for at least two decades.
To meet this growing demand, the coal ministry plans to increase all-India coal production to 1,000 million tonnes by 2024-25 and to increase Coal India production to 1,000 million tonnes by 2026-27.
The company has committed to becoming a net-zero energy company and is in the process of implementing 3 gigawatts (GW) solar power programmes by 2025-26.
All this bodes well for the company’s future. And perhaps increases the possibility of solid dividend payouts in the years to come.
Asian Paints Ltd
Asian Paints is a multinational paint companythat manufactures, sells, and distributes paints, coatings, home décor products, bath fittings, and related services. The company has major brands like Asian Paints, Berger, and Apco under its umbrella.
Along with famous brands, the company is also known for its substantially growing dividend payments year after year. Asian Paints paid 54 dividends in the past 25 years. In 2020, the company paid a dividend of ₹12 per share, which more than doubled in just five years. Resultantly, in 2024 it paid a dividend of ₹ ₹33.3 per share.
Here’s a summary of the company’s dividend payouts in the past five years.
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Investors in Asian Paints received growing dividend payouts because the company earned healthy profits over the last few years.
The company’s total sales witnessed 11.9% growth in the last five years on a CAGR basis. The growing infrastructure sector and the need for a better standard of living are responsible for the sales volume growth.
On the other hand, its net profit accelerated at 15.1% on a CAGR basis in the time period under consideration. The rise in net profit was driven by the growing importance of cost optimization in the company.
Here’s a summary of the company’s financial performance over the last five years.
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The management expects this growth to continue in the coming years. Managing director and chief executive Amit Syngle, in an interview with CNBC-TV18, said Asian Paints aims to become a ₹1 trillion revenue company in the next decade.
The company aims to achieve this revenue growth by expanding its product portfolio. Simultaneously, it is also focusing on backward integration for growth.
Recently, dark clouds hovered over the company as it faced strong competition with the Aditya Birla Group’s entry into the paint industry. However, the management remains confident of retaining the company’s position as a leader in the market.
According to Syngle, Asian Paints will continue to invest in capacity addition and fortifying its brand, unperturbed by the discounted prices offered by the latest entrant in the market.
Steep competitive pressures hang over the company. However, the company has big plans in the pipeline to mitigate these pressures, which may ensure that the company’s financial performance and dividend payouts continue to grow.
Tata Elxsi is among the world’s leading providers of design and technology services. The company provides integrated services from research and strategy, to electronics and mechanical design, software development, validation and deployment.
Tata Elxsi is a well-known name in the Tata group. Over the last five years, the company has become a darling of investors for two reasons: capital appreciation and consistent and growing dividend payouts.
The company earned multi-bagger returns of 934% in five years. On the other hand, it has generously rewarded its shareholders by paying out dividends 25 times over the last 24 years.
The company has not only maintained consistent dividend payments but has also significantly increased them. The dividend per share has quadrupled in the past five years, from ₹16.5 in 2020 to ₹70 in 2024.
Here’s a summary of the company’s dividend payouts in the past five years.
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Over the years, along with a strong dividend history, the company also delivered healthy financial performance. In the last five years its total sales grew by 17.1% on a CAGR basis. Growing demand and strategic geographical expansion drove the growth in sales.
The company’s net profit also saw a gradual increase in the last five years. On a CAGR basis, its net profits grew by 25.3%. This achievement is a testament to the company’s effective cost management, strategic initiatives, and strong operational efficiency.
Here’s a summary of the company’s financial performance over the last five years.
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Tata Elxsi is not a new name for investors, owing to its vast presence. It is a global leader in design and technology services.
The world is entering an era in which technology will be intimately connected to people, businesses, and the environment in new ways, in media, communications, automotive, and healthcare industries, among others.
The company is gearing up to make the most of this growing need for technology. In September, it opened a new xG-Force lab in Bengaluru. The lab will address key areas such as streaming media, private 5G, connected and electric vehicles, network charging stations, digital health, aerospace and Industry 4.0 solution for smart factories.
The company is investing in digital, AI, and Gen AI technologies across its verticals, and is leading the focus primarily on efficiency and quality improvements for product engineering and novel AI applications related to solving complex business and engineering problems.
It’s apparent that the company is already geared up for the future. Given its proactive approach, strong reputation, and solid foundation, the company is well-positioned for potential future success. Perhaps that will also reflect in even potentially larger dividend payouts in the years to come.
Conclusion
When we talk about the world of investing, it would be impossible not to mention ace investor Peter Lynch. His investment advice often helps investors make informed decisions.
When it comes to dividends, Lynch has a very specific opinion. In his book, One Up on the Wall Street, he writes: “The basic conflict between corporate directors and shareholders over dividends is similar to a conflict between children and their parents over trust funds. The children prefer quick distribution, and the parents prefer to control the money for the children’s greater benefit.”
From the above quote, it is clear that Lynch believed companies paying high dividends might be sacrificing opportunities to reinvest profits for the company’s greater long-term benefit. No wonder he mentions that companies that pay huge dividends may be slow growers.
In a nutshell, there is a possibility that the companies that pay high dividends may potentially offer a slow growth rate. Hence an investor should carefully consider the above while investing in a dividend stock.
However, Lynch also makes certain points in favour of investing in dividend stocks. He writes in the same book: “One strong argument in favour of companies that pay dividends is that companies that don’t pay dividends have a sorry history of blowing money on a string of stupid diworsification.”
Hence, dividend-paying companies, by distributing profits, are less likely to misuse cash on unproductive ventures, offering investors peace of mind. An investor should analyse whether the dividends stem from sustainable profitability or come at the expense of reinvestment opportunities that could drive future growth.
Lynch emphasizes investing in dividend companies with a long history of dividend payment. He believes that a company with a 20- or 30-year record of regularly raising dividends can be an investor’s best bet because companies like these offer a real cushion against market downturns.
For more such analysis, read Profit Pulse.
To sum up, Peter Lynch’s views on dividends provide valuable guidance for investors. While high dividends may limit reinvestment opportunities and slow down growth, companies with a long history of raising dividends offer stability and a cushion against market downturns.
Investors should strike a balance between dividend-paying and growth stocks, focusing on the company’s fundamentals and the sustainability of its payouts. In the end, dividends should complement, not compromise the long-term potential.
Note: We have relied on data from www.screener.in and annual reports. throughout this article. Only in cases where the data was not available have we used an alternative but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to deep into the world of companies, studying their performance, and uncovering insights that bring value to her readers.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article.