Penny stocks refer to shares of small companies that trade at low prices, usually below ₹10 per share.
Mostly, penny stocks are issued by companies with low market capitalization. However, cheap does not necessarily mean inferior quality. Low-cost investments with strong underlying financials and operational dependability are considered fundamentally sound penny stocks. Penny stocks with dividends, for instance, are worth considering as they have the added allure of contributing to investor returns by way of dividends.
This blog post will discuss in detail penny stocks that pay dividends. Here are the five best penny stocks for 2024 in India which you can invest in after conducting proper research.
What are dividend-paying penny stocks?
Dividend-paying penny stocks are stocks or shares of small companies that typically trade at a very low price. Typically, the stocks of these small companies trade below Rs. 10 and offer a dividend payout to their shareholders.
Small companies that have just started their journey in the stock market or are at an early stage of expansion are often termed penny stocks. Essentially, dividends of penny stocks are the small portions of profit offered by these companies to their investors.
Investors are often drawn to penny stocks with dividends due to their affordability and the prospect of higher returns. But it is equally important for you to note that investing in penny stocks involves risks including market manipulation, liquidity issues, and pump-dump schemes.
Best five highest dividend-paying penny stocks in India in 2024
Dividends are a good way of earning income from your stock investments, apart from gains from increases in stock prices. Thus, it might be a good idea to consider penny stocks with dividends. We have compiled a list of the five best penny stocks in India for you.
| Name | Market Cap(Cr) | PE | Div YId |
| Ujjivan Small Finance Bank Ltd | 6497.86 | 5.58 | 4.47 |
| Southern Petrochemicals Industries Corporation Ltd | 1480.67 | 9.55 | 2.06 |
| Motherson Sumi Wiring | 27176.55 | 41.16 | 1.30 |
| UTI Asset Management Company Ltd | 16,357 | 19.4 | 1.87 % |
| Jagran Prakashan Ltd | 1,812 | 11.2 | 6.01 % |
Overview of the best 5 highest dividend-paying stocks in India in 2024
Clearly, just knowing the numbers is not enough. Let us learn more about these five top penny stocks with high dividend yield.
Ujjivan Small Finance Bank Ltd
Ujjivan Small Finance Bank Ltd is a top dividend-paying penny stock of 2024 that catches the attention of income-seeking investors. The bank is known for financial inclusion, and this is translated to its robust dividend payout and consistent earnings growth. It’s prudent risk management and diversified loan portfolio makes it a safe lower-risk investment for those looking for regular dividends, adding that it further expands its footprint within rural and semi-urban markets.
Southern Petrochemicals Industries Corporation Ltd
Southern Petrochemicals Industries Corp Ltd (SPIC) is a high payout dividend-paying penny stock in 2024. For this reason, SPIC operates in the chemical and fertilizer industry, where the demand for agricultural inputs such as pesticides and fertilizers is increasing. The income of the company is contributed by its strong operational efficiency and focus towards sustainable practices. SPIC offers dividends along with long-term growth potential and is attractive with a history of rewarding shareholders.
Motherson Sumi Wiring
In July 2020, Motherson Sumi Wiring was set up which focuses on the manufacturing and selling of original automotive equipment. The company has 230 facilities across over 41 countries and its headquarters is in Noida near Delhi. It’s listed on the BSE and the NSE. It is a Joint Venture between Sumitomo Wiring Systems Limited of Japan and SamvardhanaMotherson International Limited.
UTI Asset Management Company Ltd
In 2024, UTI Asset Management Company Ltd, India’s important mutual fund industry player, has put up a reputation of high dividend payments. UTI AMC leverages its extensive market presence and constantly generates substantial revenues from the management of a wide basket of funds. In fact, its reliability lies in its ability to stay profitable irrespective of market fluctuations. This stock makes an attractive investment for income-seeking investors in the financial services sector.
Jagran Prakashan Ltd
Among high dividend-paying penny stocks of 2024, Jagran Prakashan Ltd stands apart as a phenomenon media company. The company’s presence in print and digital media is known to be robust, and it still rewards with attractive dividends. Revenue growth is fueled by its strategic expansion of digital content and regional markets. Jagran offers value to dividend-focused investors in the media sector, located being a player committed towards shareholder returns and operational efficiency.
Why invest in dividend-paying penny stocks?
While investing in the stock market has its own risks, penny stocks that pay dividends offer several advantages.
- Low cost
As its name suggests, penny stocks let you enter the marketplace with a very minimum investment. Therefore, investors can diversify their portfolios and try to maximize their profits if the market condition favours them.
- Attractive dividend yields
The primary reason for investing in penny stocks with dividends is their high dividend yield. The dividends that these penny stocks offer are often much higher than those of well-established companies. High dividends compensate for the risks of investing in non-popular, comparatively smaller business stocks.
- Growth potential
The companies that offer penny stocks may be small but they often possess great potential for future expansion. If these companies manage to grow their business, their stock prices will naturally surge, providing you the opportunity to gain a good profit on your invested capital.
- Acquisition targets
Another huge prospect of profit in investing in penny stock companies is that there remains a potential for large companies to acquire them based on their growth potential. Acquisition by a larger company means a direct increase in stock prices, providing you better exit opportunities with great returns.
How to identify the best dividend-paying penny stocks in India?
Having learned about the many benefits of penny stocks with dividends,you must be eager to invest in some of them. Well, in order to invest, you will first have to identify potentially profitable penny stocks. Here are some useful tips that would come in handy.
- Analyze the Dividend History
In penny stocks with dividends, the most important aspect of investment is the dividend. Consider analyzing them thoroughly. Research the company’s dividend history and check on its dividend payment record. It will help you to identify the companies that have increased their rate of dividend over the years.
- Analyze the Financial History
Another factor you need to check is the company’s financial condition. You can get an idea by checking on their profit margin, revenue, debt ratio, and cash flow. Follow the financial trends of the companies you are interested in to choose the most financially stable and profitable one.
- Consider the Growth Prospect
Another important factor is the growth potential of the company whose penny stock you are interested in buying. Choose companies with a high growth potential or whose business ideas are futuristic. Pick the ones with a clear brand identity and distinct approach towards business expansion.
- Monitor Industry Trends
Keep yourself updated on the changing market trends to assess their impact on the performance of your chosen company’s penny stock.
Factors to consider before investing in dividend-paying penny stocks in India
Dealing with penny stocks with dividends would be profitable only if you have a risk-taking ability, strategy, and clarity of exit. Let’s discuss these factors a bit.
- Risk Tolerance Ability
Though investing in penny stocks might appear risk-free, in reality, it is not. You may face liquidity issues, and fall into the trap of pump-and-dump schemes and market manipulation. So, be clear about how much risk you are able to handle.
- Exit Strategy
An exit strategy is crucial for any stock market investment. Set up your exit point price range, and specific conditions to trigger an immediate exit to protect against grave financial loss.
- Diversification of Assets
While buying penny stocks, consider diversifying your capital across small promising companies across different sectors. Do not invest all your money in one sector and never in one company.
- Investment Horizon
These small companies will demand your patience and time to grow at your anticipated rate. So, give your stocks time to grow. Do not make hasty decisions on seeing minor price fluctuations.
- Regulatory Considerations
Another vital factor you need to consider while making penny stock investments is the regulatory environment. As these are small companies, they are closely monitored by regulators for any irregularities.
Conclusion
In conclusion, penny stocks with dividends in India provide investors with a good chance of making profits with comparatively nominal capital investment. But you will have to be cautious in your approach and diversify your investments to garner profits in the long term. With thorough research, discipline, and timely anticipation of changes in market dynamics, you can earn significant dividends from your penny stocks.
