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Every investor in the stock market desires capital appreciation as well as substantial dividend returns at regular intervals. Such investors focus primarily on companies’ dividend yields. If you’re looking for such stocks in the stock market, it’s crucial to learn about five such prominent stocks, including Anil Agarwal’s Vedanta Limited, that are attracting investors.

What is dividend yield and how does the calculation work?

Dividend yield, in simple terms, tells us how much dividend a company is paying in a year compared to the current share price. For example, if a share is priced at ₹100 and the company pays an annual dividend of ₹5, the dividend yield would be 5%. If the same share falls to ₹50 and the company still pays a dividend of ₹5, the dividend yield would increase to 10%. This is where new investors need to be most cautious, because sometimes, due to the falling share price, the dividend yield appears artificially high on paper.

Top 5 high dividend yield stocks, including Anil Agarwal’s Vedanta

According to an analysis of market data, Anil Agarwal’s Vedanta Limited tops the list of stocks with the highest dividend yields. Here’s a list of these top five stocks:

• Vedanta: This stock has the highest dividend yield of around 12.9 per cent and is listed by around 76 mutual fund schemes in their portfolio.
• Gujarat Pipavav Port: The dividend yield of this port company has been around 6.9 percent and around 9 mutual fund schemes have invested in it.
• Castrol India: This giant in the lubricant sector has a dividend yield of around 4.7 per cent, which is supported by around 13 mutual funds.
• TCS: Tata Consultancy Services, one of the largest IT companies in the country, has a dividend yield of around 4.5 per cent and is held by 156 mutual fund schemes in their portfolio.
• Infosys: IT giant Infosys has a dividend yield of around 4.2%. It is the most held stock on this list with 244 mutual funds.

What are the major risks and necessary precautions for investors?

New investors should avoid the mistake of blindly investing solely on the basis of high dividend yields or large mutual fund holdings. Vedanta’s 12.9% yield doesn’t mean that investing ₹1 lakh will guarantee a guaranteed return of ₹12,900 annually. Dividends depend entirely on the company’s profits, debt, business model, and future needs. The businesses of IT giants like TCS and Infosys depend on global markets and technological changes. Therefore, before investing in any company, carefully examine its track record, debt situation, cash flow, and business growth.