Investing in stocks with a solid dividend yield can be a game changer for both investors and companies alike. A robust dividend not only signifies a company’s financial stability but also offers investors a reliable source of passive income. Companies that provide dividends demonstrate confidence in their ability to generate consistent profits, fostering a strong relationship with their shareholders.

High Dividend Yields: Beyond the Ordinary Investor

Many believe that high dividend yields only attract average investors, but that notion couldn’t be further from the truth. Renowned investors, often dubbed the "Warren Buffetts of India," also gravitate towards stocks with impressive dividend yields. While these seasoned investors may prioritize various factors, the allure of dividends certainly plays a role in their investment choices.

Spotlight on Two Notable Stocks

Let’s delve into two stocks favored by India’s investment titans that have reported remarkable dividend yields. With their latest financial results released, now is an opportune moment to explore these options.

Chennai Petroleum Corporation Limited

Chennai Petroleum Corporation Limited (CPCL) specializes in refining crude oil, producing various petroleum products, and manufacturing lubricating oil additives. With a market capitalization of ₹9,396 crore, CPCL is partially owned by Indian Oil Corporation Ltd (IOCL), which holds a 52% stake.

Notably, Dolly Khanna, a prominent Indian investor, has been involved with CPCL since June 2022, currently holding a 1.09% stake valued at ₹102 crore. The company boasts a remarkable dividend yield of 8.72%, second only to IOCL’s 8.91%, significantly surpassing the industry median of 3.85%.

Financial Performance Highlights

• Sales Growth: From ₹36,973 crore in FY20 to an impressive ₹59,356 crore expected in FY25, reflecting a 10% compound annual growth rate over five years.

• EBITDA Fluctuation: The EBITDA figures have experienced volatility:

  • FY20: -₹2,157 crore
  • FY25: Expected ₹1,016 crore
• Net Profit Variability: Similar trends are seen in net profits:
  • FY20: -₹2,056 crore
  • FY25: Expected ₹214 crore

The stock price surged from approximately ₹62 in April 2020 to ₹631 by April 25, 2025, marking an astounding 920% increase. An investment of ₹1 lakh five years ago would now exceed ₹10 lakh.

Despite this growth, the current share price reflects a 50% discount from its peak of ₹1,275. At a PE ratio of 44x, CPCL is trading above the industry median of 21x, with a historical median PE of around 5x.

VST Industries Limited

Founded on November 10, 1930, VST Industries Limited, originally known as Vazir Sultan Tobacco Company, is an associate of British American Tobacco Plc. This company is a significant player in India’s cigarette manufacturing market.

With a market cap of ₹5,143 crore, VST is the third-largest tobacco firm in India, with its brand, Total, ranking among the top ten in the sector. Radhakishan Damani, another famous investor in India, has maintained a stake in VST since December 2019, holding a combined 29.15% through his investment entities, valued at nearly ₹1,500 crore.

VST currently offers a dividend yield of 4.5%, the highest in its industry, compared to an industry median of 1.96%.

Financial Overview

• Sales Performance: Sales grew from ₹1,239 crore in FY20 to approximately ₹1,398 crore in FY25, yielding a 2% annual growth.
• EBITDA Decline: EBITDA decreased from ₹415 crore in FY20 to ₹279 crore in FY25.
• Net Profit Consistency: The net profit figures have remained relatively stable, with FY25 projected at ₹290 crore.

The share price of VST rose from about ₹253 in April 2020 to ₹303 as of April 25, 2025, reflecting a 20% increase. However, this price is still 38% lower than its all-time high of ₹487. The current PE ratio stands at 24x, while the industry median is 33x.

The Dividend Dilemma

Both Chennai Petroleum Corporation Limited and VST Industries Limited have carved out their spaces among India’s elite investors like Radhakishan Damani and Dolly Khanna, thanks to their substantial dividend yields of 8.72% and 4.5%, respectively. These stocks present intriguing opportunities for income-focused investors, although risks remain.

The remarkable 920% surge in Chennai Petroleum’s share price over the past five years and VST Industries’ reliable dividends are appealing. However, both companies are trading below their historical highs, and their profit figures exhibit considerable volatility.

Conclusion

For investors seeking passive income and growth, these stocks provide a compelling mix of potential rewards and inherent risks. Keeping a close watch on these two companies could be a wise strategy as you consider joining the ranks of India’s investment icons.

Disclaimer: This article serves to provide insights and is not a recommendation for investment. Consult a financial advisor before making any investment decisions.