Invest in strong dividend stocks for reliable income

Raja Venkatraman, co-founder of NeoTrader, highlights the importance of investing in dividend-paying stocks as a way to create a reliable income and build wealth over time. Despite a tough market in early 2025, characterized by a weak rupee and declining earnings, Venkatraman suggests focusing on solid dividend payers. Investors should look for stocks with a healthy dividend yield of around 4-5%. Avoid stocks with very high yields, as these may indicate financial troubles. Consistency in dividends is also key; companies like Coal India Ltd and NTPC Ltd are noted for their reliable payouts. Another important aspect is a company’s financial health. Businesses with strong profits and low debt are more likely to maintain dividends. Defensive sectors like utilities and fast-moving consumer goods are more resilient during market volatility, often housing companies with stable dividends. Investors should also consider the payout ratio, ideally between 40-60%. A very high ratio may not be sustainable if a company's earnings fall. Government-owned companies, or PSUs, often have mandates to distribute profits as dividends, making them worth considering. Venkatraman recommends several stocks for dividend investors in the current market. Coal India, for instance, has a strong yield of around 6.95% and a low debt-to-equity ratio, which supports its ability to pay dividends. The company has a history of high payout ratios and is expected to see its share price recover over the next few months. Gujarat Pipavav Port Ltd offers a dividend yield in the 4-5% range, backed by strong operational performance. The company has shown resilience despite recent challenges and is poised for potential growth. Vedanta Ltd is another strong option, known for its consistent dividend payouts and solid financial standing. The company operates in various resource sectors and has a good balance between payouts and reinvestment. Its stock is also showing signs of recovery, with positive trends indicating potential for further gains. Overall, applying these investment principles can help build a robust dividend-focused portfolio, providing both income and long-term growth.