2025 has been tough for the Indian stock market, given the persistent selling, leading to a severe correction. This has been fueled by several factors, starting with the rupee depreciation, high market valuations, and a slowdown in earnings.
Moreover, foreign investors (FIIs) have been selling persistently due to the strong dollar, high bond yields, and uncertainties over Trump’s policies.
The combination of these factors has created a challenging market environment, which, based on the December quarter results, is likely to persist.
In these circumstances, investors tend to prefer dividend investing.
Stocks that pay consistent dividends tend to exhibit low volatility. They provide a steady income stream and the potential for capital appreciation.
Some stocks even increase dividends intermittently, providing investors with steady income growth.
Nevertheless, not all companies consistently pay or increase dividends. Identifying those with a track record of regular payments and steady dividend growth is essential.
In this editorial, we’ve shortlisted 5 stocks that have increased dividends in the past few quarters. At their current market price, these stocks also pay higher dividend yields.
These stocks are a way to obtain passive income, and they should be on your watchlist.
First on the list is Indian Oil Corp (IOC).
IOC is India’s largest oil marketing company (OMC) and third-largest oil and gas company.
The company operates 11 of India’s 23 refineries, collectively holding a refining capacity of 80.7 million tonnes per annum (MTPA). It has a global presence in over 70 countries.
As a public sector company (PSU), IOC has a rich legacy of paying consistent dividends and increasing them.
It paid a total dividend of Rs 11.7 per share in FY24, translating into a dividend yield of 7.2%. The dividend payout ratio for the year was 38.3%
In addition, it increased its per share dividend to Rs 7 in the fourth quarter of FY24 from Rs 5 in Q2 FY23.
Over the last 5 years, IOC has averaged a dividend payout of 87% and an average dividend of Rs 8 per share. Since 2001, it has distributed 39 dividends, providing consistent passive income to shareholders.
IOC is a cash-rich company with Rs 31.6 billion (bn) in cash and cash equivalents. Hence, dividends are expected to continue going forward.
To prepare for the future, the company is investing in expanding its capacity in fossil fuels and the green energy sector. To this end, it is expected to incur a capex of Rs 360 bn in FY26. The government has also allocated Rs 150 bn to three OMCs in FY25.
Next on the list is Hindustan Zinc.
Hindustan Zinc is India’s largest integrated zinc producer and the second largest globally. Its zinc operations command about 75% of the primary zinc market in India.
Additionally, it ranks as the third-largest silver producer globally, with an annual capacity of 800 MT.
Over the past four years, this company has delivered record dividends to its shareholders. In FY23, it distributed a total of Rs 320 bn, followed by a payout of Rs 54.9 bn in FY24.
In the first quarter of FY25, it paid a dividend of Rs 19 per share, translating into a dividend yield of 8.5%. This dividend was increased by 90% from the last quarter.
In the last five years, it has paid an average dividend of Rs 25.56 per share with a dividend payout ratio of 113.2%.
The recent rise in dividend payouts can be linked to Vedanta’s deleveraging efforts at the parent level. Nevertheless, it has consistently distributed dividends, paying more than Rs 1 trillion (tn) in dividends in the last 12 years.
Moreover, it has declared dividends 38 times in the previous 20 years, with an average dividend of Rs 14.9 per share.
As part of its growth strategy, the company plans to diversify its zinc product offerings and boost sales contributions from silver.
Additionally, it operates a captive power plant and aims to fulfill 70% of its energy requirements through renewable sources by 2027.
As of FY24, Hindustan Zinc held cash and cash equivalents amounting to Rs 101.9 bn and generated substantial annual cash flow.
This is expected to continue, which is good news for shareholders looking for dividend income.
Next on the list is GAIL.
GAIL is India’s leading natural gas processing and distribution company. It primarily transports, transmits, and markets natural gas and petrochemicals. It commands a 66% market share in gas transmission and over 54% in gas trading market share in India.
GAIL, a PSU company, has a history of paying consistent dividends and increasing them as profits grow. It has paid 47 dividends since September 2001.
Over the last 5 years, GAIL has paid an average dividend of Rs 6 per share, with an average payout ratio of 39.6%.
It paid a dividend of Rs 5.5 in FY24, translating into a dividend yield of 3%.
Thereafter, in Q3FY25, the dividend increased by 18% to Rs 6.5, translating into a yield of 4% at the current price (CMP) of Rs 164.
Going forward, GAIL remains optimistic for growth, supported by increasing demand from city gas distribution networks and new LNG supply contracts.
The company also plans to increase its LNG trading volumes by 200% over the next five years.
Next on the list is TCS.
TCS is the Tata Group’s flagship enterprise, with operations in 150 locations in 46 countries. It’s Asia’s largest IT services and consulting company, and second globally after Accenture.
It provides consulting, service integration, and application management services to various sectors, including banking, capital markets, education, healthcare, and insurance.
TCS is a cash-rich company known for rewarding its shareholders handsomely. Its average dividend payout ratio has been 65% in the last five years.
In FY24, it paid a dividend of Rs 73 per share, translating into a dividend yield of 1.9% and a dividend payout ratio of 57.3%.
However, TCS gave Rs 76 per share dividend in Q3FY25 alone, a massive increase from the Rs 10 paid in the last quarter. This amounts to a dividend yield of 2% at CMP.
Currently, TCS is navigating challenges in the demand environment due to muted spending in the US market, which, according to the management, is expected to reverse in FY26.
Nonetheless, TCS has a strong order book and is investing in the next growth drivers in emerging technologies, like investments in agentic AI capabilities.
In FY24, TCS generated an operating cash flow (OCF) of Rs 451 bn. It distributed 102% of OCF to shareholders.
Given its past two decades of distributing 77.5% of its OCF, TCS will continue to reward shareholders in the future.
Next on the list is REC.
REC is a central public sector undertaking under the Ministry of Power. It provides loans to finance projects in the complete power sector value chain, from generation to distribution.
Over the last five years, REC has averaged a dividend of 135%, with its dividend per share averaging Rs 13.
Its dividend payout as a percentage of equity share capital has consistently increased from 82.5% in FY19 to 160% in FY24.
In FY24, it paid a dividend of Rs 16 per share, translating into a dividend yield of 3.5% and a payout ratio of 29.8%.
REC has increased its dividend over the past two quarters. It paid Rs 3.5 in the first quarter of FY25 and Rs 4 in the second quarter.
This increased to Rs 4.3 in the third quarter, translating into a dividend yield of 1% at CMP.
With its cash balance at ₹25 bn (FY24) and a history of increasing dividends, the payout is expected to keep rising.
The company is strategically placed as the demand for financing in the power sector is seeing strong traction due to increasing power demand.
The sector requires substantial investments of about Rs 42 tn in the coming decades, with 85% of this capital expenditure anticipated to go towards power generation.
Moreover, the government’s emphasis on the Nuclear Energy Mission, PM Surya Ghar Muft Bijli Yojana, is expected to accelerate the demand for financing.
REC’s strong position as a primary financier in the power sector will likely make it a significant beneficiary of this demand.
These growth prospects could not only help compound its share price in the future but also enable it to reward shareholders through increasing dividend payout.
Conclusion
These were some dividend-paying stocks that investors could consider adding to their watchlist in 2025 and beyond. They have a cash-rich balance sheet and are known for rewarding shareholders.
Investing in companies that constantly increase their dividends can be rewarding, especially for investors looking for consistent income increases in line with inflation.
Such stocks can also offer capital appreciation but return much less than growth stocks. They are best suited for risk-averse investors, as they can provide downside protection.
Nevertheless, buying the best dividend stocks does not mean picking the ones with the highest yields. You must thoroughly check the business fundamentals before buying a high dividend-yield stock.
Happy Investing.
Disclaimer:
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