Top 6 Midcap Stocks with High Dividend Yields

Dividend paying stocks are often used as a means to earn passive income.

On one hand, dividends act as a bonus during a bull run, On the other hand, they help investors sail through the volatile phases of the market by providing consistent income.

However, when it comes to dividends, midcap stocks are the most neglected. Mainly because of a preconceived notion that large caps stocks are well established, and have a greater potential to generate consistent cash flows.

But that's not true.

Midcap stocks usually have a higher growth potential than large-cap stocks.

By investing in them, you are not only gaining from regular dividend payments, but also long term capital appreciation.

Here are top midcap stocks with high dividends yields in the market right now. We have shortlisted them using our stock screener.

#1 REC

REC has the highest dividend yield among midcap stocks, with a 5-year average dividend yield of 7.8%.

The company has been consistently paying dividends to its shareholders since 1998. Its five-year average dividend payout stands at 36.5 %.

The company's primary business is to finance projects in the power sector, right from power generation to power distribution.

It offers financial assistance to state governments, state electricity boards, independent power producers, and private sector utilities.

REC's net interest income has grown at a CAGR of 13% in the last three years, owing to increased loan disbursements.

Its net profit has also grown at a CAGR of 13.4%, with a net profit margin of 23.6% in the financial year 2021.

In the recent quarterly results, the REC's loan book saw a growth of 9% and stood at Rs 3.89 tn.

Being a public sector company, it's the primary beneficiary of government initiatives such as Deendayal Upadhyaya Gram Jyoti Yojana and the revival of discoms.

To know more about REC, check out its factsheet.

REC Dividend History - Last 5 Years

Year	Dividend/Share
2016-2017	9.65
2017-2018	9.15
2018-2019	11
2019-2020	11
2020-2021	12.71

Source: Equitymaster

#2 Power Finance Corporation

Second on our list is an infrastructure finance company, Power Finance Corporation.

The company's five-year average dividend yield stands at 5.4% while its five-year average dividend payout stands at 36.9%.

Similar to REC, Power Finance Corporation (PFC) is a non-banking financial corporation (NBFC). It extends financial assistance to Indian power companies.

It offers loans to various power sector activities, including generation, transmission, distribution, plant renovation, and maintenance.

The company's clients include state electricity boards, central and state power utilities, power departments, equipment manufacturers, and private sector power utilities.

PFC's net interest income has grown at a CAGR of 12% in the last three years due to growth in its loan asset book.

Its net profit grew at a CAGR of 5.8%, led by a fall in the cost of funds.

In the recent quarterly results, PFC's net interest income grew 12.7% year-on-year (YoY), and net profit grew by 23.7% (YoY).

The company is the nodal agency for several Ultra Mega Power Projects. Hence it's the primary beneficiary for several government initiatives in the power sector.

To know more about Power Finance Corporation, check out its factsheet.

Power Finance Corporation Dividend History - Last 5 Years

Year	Dividend/Share
2016-2017	5
2017-2018	7.8
2018-2019	0
2019-2020	9.5
2020-2021	10

Source: Equitymaster

#3 HPCL

Next on our list is Hindustan Petroleum Corporation Limited (HPCL), with a five-year average dividend yield of 5.6%.

The company has been consistent in paying dividends to its shareholders. The five-year average dividend payout ratio stands at 43.38%.

HPCL is one of India's leading oil marketing companies, with a market share of 21%. It's an integrated refinery and petroleum marketing company.

The company has a refining capacity of over 15 million metric tonnes per annum (MMTPA) in its Mumbai and Visakhapatnam plants that are running at a utilisation rate of above 100%. It plans to invest over Rs 390 bn over the next few years to increase its capacity to over 24 MMTPA.

In the last five years, HPCL's revenue has grown at a CAGR of 4.1%, and its profit has grown at a CAGR of 12.1%.

A strong established presence in the market and aggressive branding initiatives have helped the company maintain its sales volumes.

In the latest quarterly results, HPCL's revenue grew 32.7% YoY while its net profit stood at Rs 7.7 bn. Going forward, the company's revenues are expected to go up due to capacity addition.

To know more about HPCL, check out its factsheet.

HPCL Dividend History - Last 5 Years

Year	Dividend/Share
2016-2017	21.5
2017-2018	18.3
2018-2019	17.1
2019-2020	10.5
2020-2021	23.3

Source: Equitymaster

#4 NHPC

Fourth on our list is India's largest hydropower company, National Hydroelectric Power Corporation (NHPC).

It has a five-year average dividend yield of 6.2%. The company has also been consistently paying dividends in the last five years. Its five-year average dividend payout stands at 49.3%.

NHPC is primarily engaged in the business of generation and sale of power to various power utilities. The company also provides project management and consultancy services.

It has a total installed capacity of 7,071.2 megawatts (MW) across 24 power stations in India. As of September 2021, the company has seven projects under construction, which will add 5,894 MW to the existing capacity.

The company has recently set up a subsidiary named NHPC Renewable Energy to expand into the clean energy space.

NHPC's net profit has grown at a CAGR of 8.2% in the last three years, while its three-year average net profit margin stands at 34 %.

In the recent quarterly results, the company's revenue fell by 9% YoY mainly due to the shutdown of one power station led by lower water availability. However, the net profit grew by 79% YoY because of lower expenses and tax incentives.

To know more about NHPC, check out its factsheet.

NHPC Dividend History - Last 5 Years

Year	Dividend/Share
2016-2017	1.8
2017-2018	1.4
2018-2019	1.5
2019-2020	1.5
2020-2021	1.6

Source: Equitymaster

#5 Petronet LNG

Next on our list is Petronet LNG, a pioneer in setting up liquified natural gas (LNG) terminals in India.

Its five-year average dividend yield stands at 3.5% and five-year average dividend payout at 50.6%.

Established as a joint venture between four public sector oil companies, Petronet LNG is the fastest-growing public limited company in the energy sector.

Its primary business includes transportation, storage, and regasification of LNG.

Petronet LNG operates from two company-owned facilities in Gujarat and Kerala. It has a combined capacity of 22.5 MMTPA and is responsible for 40% of gas supplies in the country.

The company plans to expand its capacity by 5 MMTPA in two phases spread over the next four to five years. It also plans to expand abroad by setting up regasification terminals in Bangladesh and Sri Lanka.

Petronet LNG's revenue in the financial year 2021 stood at Rs 263.8 bn. Due to higher volumes, its net profit has grown at a CAGR of 10.7% in the last three years.

In the recent quarterly results, the revenue and net profit grew by 71.9% YoY and 31.9% YoY, respectively.

There is good cash flow visibility due to the long term and medium-term sales agreement with its customers for a capacity of 15.8 MMTPA.

To know more about Petronet LNG, check out its factsheet.

Petronet LNG Dividend History - Last 5 Years

Year	Dividend/Share
2016-2017	2.5
2017-2018	4.5
2018-2019	10
2019-2020	12.5
2020-2021	11.5

Source: Equitymaster

#6 NMDC

Last on our list is NMDC, the largest iron ore producer in the country.

Its five-year average dividend yield is 5.1% and it has a five-year average dividend payout of 43.3%.

The company is primarily engaged in the business of exploration of iron ore, copper, limestone, tin, and diamond. It also produces and sells sponge iron and generates wind power.

NMDC has seven iron mines with a combined capacity of 36 MTPA and long-term licences for several mines. The company is investing in capex to increase its production capacity to 67 MTPA.

NMDC's revenue has grown at a CAGR of 7.3% in the last three years. Its net profit has also grown by 10.4% due to lower mining costs of high-grade iron.

In the recent quarterly results, NMDC's revenue grew by 35% YoY with the net profit margin at 34.9%.

Going forward, the company's revenue growth will be aided by the steelmaking business that it has recently ventured into.

To know more about NMDC, check out its factsheet.

NMDC Dividend History - Last 5 Years

Year	Dividend/Share
2016-2017	5.6
2017-2018	4.6
2018-2019	5.8
2019-2020	5.5
2020-2021	7.8

Source: Equitymaster

Snapshot of top midcap stocks in India with high dividend yield from Equitymaster's Stock Screener

Here's a quick view of the top companies based on crucial financials.

Please note that these parameters can be changed according to your selection criteria.

This will help you identify and eliminate stocks that are not meeting your requirements and emphasise those stocks that are well inside the metrics.

Should you invest in dividend stocks?

Dividend stocks offer dual benefits of capital appreciation and consistent income. Investors looking for passive income can consider adding them to their watchlist.

These stocks also help ride out short-term market volatility and minimise the effect of inflation on the portfolio.

Companies that pay dividends usually have a robust financial profile and are more stable during volatile times than companies that don't pay regular dividends.

However, one shouldn't forget to check how the company is paying dividends regularly. Are they generating enough cash flows, or are they just borrowing money or raising more equity to keep up with the consistency in paying dividends?

A profitable company with positive cash flows and low debt is more likely to pay dividends than others.

Hence, it is important to check the business's profitability, fundamentals, and valuations before investing in it.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...