Swaraj Engines and Two Other Top Dividend Stocks to Consider

The Indian market has shown robust growth, up 2.4% last week and 46% over the past year, with earnings expected to grow 16% annually. In such a buoyant environment, dividend stocks like Swaraj Engines may be particularly attractive to investors looking for steady income combined with potential capital appreciation.

Top 10 Dividend Stocks in India

Click here to see the full list of 16 stocks in our Best Dividend Stocks Analysis tool.

Let’s take a closer look at some of our picks from the featured companies.

Simply Wall St Dividend Rating: ★★★★☆☆

Preview: India-based Swaraj Engines Limited is engaged in manufacturing and selling diesel engines, diesel engine components and tractor spare parts with a market capitalisation of approximately ₹35.90 billion.

Operations: Swaraj Engines Limited generates its revenue primarily from the sale of diesel engines, tractor components and spare parts, totalling approximately ₹14.19 billion.

Dividend yield: 3.2%

Swaraj Engines offers a dividend yield of 3.21%, which puts it in the top 25% of Indian dividend payers. However, its dividends are not well covered by earnings or cash flows, with a payout ratio of 83.7% and a cash payout ratio of over 100%. Despite this, Swaraj Engines has been increasing its dividend payouts over the past decade, although these payouts have shown some volatility. Earnings growth is modest at around 9.13% per annum, supported by a historical earnings growth rate of 15.4% per annum over the past five years. The company’s recent CGST penalty is not expected to have a material impact on the financials.

Simply Wall St Dividend Rating: ★★★★☆☆

Preview: Ujjivan Small Finance Bank Limited offers a range of banking and financial services across India with a market capitalization of approximately ₹86.66 billion.

Operations: Ujjivan Small Finance Bank Limited provides a variety of financial services across India.

The story continues

Dividend yield: 3.3%

Ujjivan Small Finance Bank, which recently launched dividend payments, offers a yield of 3.35%, which places it in the top quartile of Indian dividend stocks. The sustainability of its dividend is reinforced by a low payout ratio of 22.6%, with future earnings expected to more than cover the dividend (projected payout ratio of 17.2% in three years). However, its short dividend history and high non-performing loans ratio (2.3%) introduce elements of uncertainty regarding long-term reliability. The bank’s recent management changes could influence future operational strategies.

Simply Wall St Dividend Rating: ★★★★☆☆

Preview: Uniparts India Limited is a company engaged in manufacturing and selling engineered systems, solutions, assemblies and components for off-highway vehicles in various global markets including India, USA, Asia Pacific, Europe and Japan with a market capitalization of approximately ₹22.87 billion.

Operations: Uniparts India Limited generates revenue primarily from its off-road vehicle parts and components segment, totalling ₹11.40 billion.

Dividend yield: 3.9%

Uniparts India reported a notable decline in its annual revenue and net profit for the financial year ended March 2024, with sales falling to INR 11.40 billion from INR 13.66 billion in the previous year, and net profit to INR 1.25 billion from INR 2.05 billion. Despite the slowdown, Uniparts maintains reasonable dividend coverage with a payout ratio of 62.6%. The company has recently initiated dividend payments, making it premature to judge the stability or growth of these dividends. Trading at a price-to-earnings ratio of 18.3x, Uniparts offers value relative to its peers and the broader Indian market average of 34.4x price-to-earnings, with dividends yielding an attractive top quartile yield of 3.86%.

To sum it all up

• Check out our full lineup of the 16 best dividend stocks here.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to constitute financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. Our goal is to provide you with focused, long-term analysis based on fundamental data. Please note that our analysis may not factor in the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.

Companies discussed in this article include NSEI: SWARAJENG, NSEI: UJJIVANSFB and NSEI: UNIPARTS.

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