Hindustan Zinc or Vedanta: Which is the Better Dividend Stock? – Stock Insights News
Introduction
In the past five months, the Indian stock markets have fallen drastically due to poor quarterly earnings, geopolitical factors, among other things. With Trump’s tariff imposition and uncertainty in the market, the stock markets could fall some more. However, during such uncertain times, investors are looking for dividend stocks for consistent returns.
Business Overview
In this article, we are comparing two dividend stocks, Hindustan Zinc and Vedanta, to determine which one is a better dividend stock.
Hindustan Zinc
Hindustan Zinc is the world’s 2nd largest integrated zinc producer and 3rd largest silver producer. It is a subsidiary of Vedanta Limited, a leading Indian diversified natural resource company. Hindustan Zinc is self-sufficient with respect to power and has captive thermal power plants. It has achieved backward integration through power production and possession of low-cost, high-grade zinc reserves.
Vedanta
Vedanta is a diversified natural resource company engaged in the exploration, production, and sale of zinc, lead, silver, copper, aluminum, iron ore, nickel, and oil and gas. It is the sole producer of nickel in India, one of the largest private sector crude oil producers, and one of the largest iron ore miner in India.
Valuation Ratios
The two popular valuation ratios are price to earnings (PE) and price to book value (PB). A high ratio indicates the shares are overvalued; a low ratio indicates the shares are undervalued. The PE ratios of Hindustan Zinc and Vedanta are 19.2 and 9.6, respectively. In terms of PE, Hindustan Zinc’s shares are overvalued compared to Vedanta. The PB ratios of Hindustan Zinc and Vedanta are 17.5 and 4, respectively. Even in terms of PB, Hindustan Zinc’s shares are overvalued compared to Vedanta.
Hindustan Zinc or Vedanta: Which Dividend Stock is Better?
A company pays dividends from its earnings, and hence, dividends are only sustainable until the company is making profits. Also, dividend payments are highly dependent on the management’s policy. Therefore, even a dividend paymaster can become a dividend dud. For Vedanta, high profits in financial year 2023 on account of rising commodity prices have paved the way for high dividends. However, in 2024, the profits fell almost 50% and the dividend per share also fell by 72%. Although in financial year 2025, the company has declared a higher dividend when compared to the previous year, the company’s plans to cut debt levels and sizable repayments in financial year 2026 and 2027 may not allow Vedanta to pay high dividends in the coming financial years.
Conclusion
In conclusion, while both Hindustan Zinc and Vedanta will continue to pay good dividends, Hindustan Zinc has a higher chance of paying better dividends in the long term than Vedanta. When considering a dividend stock for your portfolio, it is essential to do a thorough research of the fundamentals and corporate governance along with dividend ratios before making an investment.
Disclaimer
This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here.
Additional Resources
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Happy Investing!
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