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Indian dividend investors urged to screen for cash, not yield

The analysis says companies with high dividend yields can still fail if payouts rely on debt, weak cash conversion, or elevated leverage.

Reported · Written up by our desk · Emerging Markets

LiveMint Markets argues that dividend yield alone can mislead investors because a high yield may reflect a falling share price or a payout funded through borrowing, asset sales, or underinvestment. The outlet describes a dividend as truly sustainable only when a company generates enough cash reliably to fund shareholder payments without stressing the business.

The piece outlines a multi-step screening approach for Indian stocks, starting with a universe of high-dividend-yield names and applying five filters. They include a dividend yield above 4%, a sustainable payout ratio, strong return on equity, low debt, and a track record of real cash conversion.

LiveMint Markets says several well-known high-yield names did not pass the test, including Hindustan Zinc, which it excludes due to dividend volatility over the past decade and promoter stake reduction. It also points to Vedanta for having a debt profile that makes payouts less certain, and it frames Coal India as the closest fit for a “money-printing machine” given its state-owned near-monopoly position and its role as the largest coal producer supplying most of India’s coal for the power sector.

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