Exploring the Best Automotive Stocks with High Dividend Yield in India

Brokerage Free Team • May 7, 2024 | 14 min read • 841 views

India, a vibrant hub of automotive innovation and production prowess, stands tall as a global leader in the automotive industry. With accolades as the second-largest tractor manufacturer and the third-largest heavy truck manufacturer worldwide, India's automotive landscape is a tapestry woven with technological advancements, entrepreneurial spirit, and robust growth trajectories.

Diving into the intricate fabric of the Indian automobile sector reveals a nuanced ecosystem segmented into Two-Wheelers, Three-Wheelers, Passenger Vehicles, and Commercial Vehicles. Each segment plays a pivotal role in the nation's economic engine, contributing to its dynamic evolution and global competitiveness.

 

The Indian passenger car market, a cornerstone of the automotive realm, showcased its resilience by surging to a valuation of $32.7 billion in 2021. Projections paint an even brighter future, estimating its worth to soar to a remarkable $54.84 billion by the year 2028. Such exponential growth underscores the sector's vitality and beckons investors to explore opportunities ripe with potential.

 

In this insightful expedition through the financial realms of the automotive domain, we embark on a journey to uncover the best automotive stocks adorned with high dividend yields. Our quest delves beyond the surface, delving into the core business operations and financial prowess that define these companies' success stories.

 

Let's navigate through the roster of listed automotive companies, unveiling their manufacturing prowess and market standing. Our selection is meticulous, encompassing automotive giants alongside nimble ancillary companies that supply critical components to these industry titans. The criteria guiding our choices are clear: we seek out stocks that offer the highest dividend payouts relative to their current market price, signaling stability, and shareholder value.

 

Through this exploration, we aim to provide investors with a compass, guiding them towards opportunities that blend robust dividends with the promise of enduring growth in India's thriving automotive landscape.

 

Banco Products:

 

Established against the backdrop of 1961, Banco Products stands as a stalwart in the realm of engine cooling systems, crafting a legacy steeped in innovation and precision engineering. From Charged Air Coolers to Fuel Coolers, Oil Coolers, and AC condensers, Banco Products' repertoire spans a comprehensive array of critical components that form the lifeblood of automotive and industrial machinery.

 

Venturing deeper into its offerings, Banco also specializes in crafting De-Aeration plastic tanks, Metal Layered Gaskets, and Elastomeric molded gaskets, vital for static sealing applications across a spectrum of industries. This diverse portfolio underscores Banco's versatility and its role as a trusted provider of indispensable solutions.

 

Within the automotive sphere, Banco's influence reverberates across passenger cars, two-wheelers, three-wheelers, utility vehicles, and commercial fleets, cementing its position as a cornerstone supplier to leading OEMs such as Tata, Cummins, CAT, SAME, and Mahindra, among a constellation of esteemed collaborators. This symbiotic relationship underscores Banco's prowess in delivering cutting-edge solutions that power the wheels of progress across the automotive landscape.

 

Not content to rest on its laurels, Banco Products expanded its footprint into the aftermarket domain, operating under the esteemed banners of BANCO and NRF. The acquisition of a 100% stake in Nederlandse Radiateuren Fabriek (NRF) in 2010 further solidified Banco's presence as a premier manufacturer of automotive, industrial, railway, and marine heat transfer products across European territories, elevating its global stature.

 

Financially, Banco's trajectory paints a picture of resounding success. In the fiscal year, its gross revenue surged to a commendable Rs. 2332 Cr, marking a robust 19% growth from the preceding fiscal's Rs. 1958 Cr. Even more striking is the meteoric rise in net profits, soaring by an impressive 55% from Rs. 152 Cr to Rs. 236 Cr during the same period.

 

A closer examination of Banco's financial metrics unveils a tapestry of strength and stability. Boasting a high Return on Equity (ROE) and Return on Capital Employed (ROCE) of 24% each, Banco Products emerges as a beacon of efficiency and value creation. Trading at a Price to Earnings (P/E) ratio of 17x, Banco marries growth potential with investor appeal.

 

However, what truly sets Banco apart is its commitment to shareholder value, epitomized by its dividend yield of 3.29%, the highest in its industry. Over the past five years, Banco has consistently rewarded its shareholders with an average dividend per share of Rs. 14.4, with peaks reaching Rs. 19 per share in FY19. Remarkably, Banco has maintained a dividend payout ratio exceeding 100% of its earnings per share, a testament to its dedication to rewarding investors.

 

As Banco's share prices remain relatively subdued with P/E ratios hovering in the 6x range, its dividend yield has surged to a remarkable 31% in FY22, further accentuating its appeal as a dividend powerhouse in the competitive landscape of automotive ancillaries.

 

Particulars Amount Particulars Amount
CMP 686.65 Market Cap (Cr.) 4778.52
EPS 32.94 Stock P/E (TTM) 16.81
ROE (%) 0.2376 ROCE (%) 0.24
Promoter Holding (%) 0.6788 FII Holding (%) 0.02
Dividend Yield (%) 0.0329 Price to Book Value 4.56
Operating Profit Margin (%) 0.1561 Net Profit Margin (%) 0.10

 

Rane Brake Lining:

Rane Brake Lining, rooted in Chennai, stands tall as a beacon of excellence in the automotive parts manufacturing arena. With a legacy dating back to 1929, when it started as a distributor of automotive spare parts, Rane Brake Lining has evolved into a powerhouse, specializing in the production of brake linings, disc pads, railway brake blocks, clutch facings, and a diverse range of commercial and vehicle-specific brake pads.

 

A pivotal chapter in Rane's journey unfolded in 1987, marked by strategic partnerships with industry giants ZF and NSK, culminating in joint ventures that propelled Rane into new territories. These ventures facilitated Rane's expansion into power steering systems, occupant restraint systems, and energy-absorbing steering columns, showcasing the company's adaptability and commitment to technological advancement.

 

Rane's clientele reads like a who's who of the automotive world, boasting collaborations with esteemed names such as BMW, Hyundai, ZF, Yamaha, Daimler, Kia, Bosch, and Renault in the global market. Closer to home, Rane serves domestic giants like Ashok Leyland, TVS, Mahindra, and even the Indian Railways, solidifying its footprint across diverse automotive segments.

 

Revenue dynamics mirror Rane's strategic diversification, with 56% of its revenue stemming from disc pads and 39% from brake linings. Original Equipment Parts command a lion's share, constituting 61.5% of total revenue, while aftermarket parts contribute the remaining 39%.

 

Financially, Rane Brake Lining demonstrates resilience and growth, evident in its FY23 revenue of Rs. 599 Cr, marking an impressive 18% surge from the previous fiscal's Rs. 506 Cr. Net profits mirrored this upward trajectory, climbing by a substantial 24% from Rs. 27 Cr to Rs. 33 Cr in FY23, propelled by prudent cost management strategies.

 

Despite operating on razor-thin margins of 7%, Rane maintains robust returns, with a return on equity (ROE) of 13% and a return on capital employed (ROCE) of 19%, attesting to its operational efficiency and capital utilization prowess. Trading at a Price to Earnings (P/E) ratio of 18.7x, Rane offers investors a compelling balance of growth potential and earnings stability, further accentuated by a noteworthy dividend yield of 2.9%.

 

Delving into Rane's dividend track record unveils a commitment to shareholder value, with an average dividend per share of Rs. 20.5 over the past five years. FY19 and FY21 witnessed peak dividends at Rs. 25 per share, highlighting Rane's consistent efforts to reward its investors. Maintaining a dividend payout ratio of 50% on average against its earnings per share, Rane Brake Lining strikes a harmonious balance between reinvestment for growth and shareholder returns, reflected in its commendable average dividend yield of slightly above 3.5% over the past five years.

 

Particulars Amount Particulars Amount
CMP 808.95 Market Cap (Cr.) 671.49
EPS 43.29 Stock P/E 18.67
ROE (%) 0.1332 ROCE (%) 0.19
Promoter Holding (%) 0.7093 FII Holding (%) 0.00
Dividend Yield (%) 0.0288 Price to Book Value 2.62
Operating Profit Margin (%) 0.0744 Net Profit Margin (%) 0.06

 

Hero Motocorp:

Hero MotoCorp, the world's leading manufacturer of motorcycles and scooters by volume sales, stands as a testament to entrepreneurial vision and technological prowess. The roots of this automotive giant trace back to humble beginnings when Dr. Brijmohan Lall Munjal initiated a trading business of bicycle parts in Ludhiana in 1951. However, it was the transformative journey from bicycles to motorcycles that propelled Hero Motocorp into global prominence.

 

The pivotal moment in Hero's trajectory was the creation of the iconic Hero-Honda joint venture, a groundbreaking collaboration that reshaped India's automotive landscape. Today, Hero Motocorp's legacy resonates across 47 countries, with its flagship Hero Splendor claiming the title of the world's most sold two-wheeler.

 

Behind this success story lie eight state-of-the-art manufacturing centers and two cutting-edge R&D facilities, collectively boasting a staggering capacity to produce 95 lakh two-wheelers annually. Such scale underscores Hero's manufacturing prowess and its commitment to technological excellence.

 

Market dominance is another feather in Hero's cap, with a commanding 33.2% share of the two-wheeler market and a formidable 47% share in the motorcycle segment. In FY23 alone, Hero Motocorp sold over 51.56 lakh vehicles domestically, showcasing its enduring appeal across segments, from deluxe offerings to entry-level options.

 

Financially, Hero Motocorp's performance is robust, evident in its FY23 gross revenue of Rs. 34,158 crore, marking a commendable 16% increase from the preceding fiscal's Rs. 29,551 crore. Net profits followed suit, climbing by a noteworthy 20% from Rs. 2,329 crore in FY22 to Rs. 2,800 crore in FY23, with net profit margins standing at a healthy 8.03%.

 

Hero's financial fortitude is underscored by its impressive return on equity (ROE) of 18% and return on capital employed (ROCE) of 25%, showcasing efficient capital utilization and value creation. Trading at a Price to Earnings (P/E) ratio of 29.19x, Hero Motocorp maintains a competitive dividend yield of 2.04%, adding allure for investors seeking a blend of growth potential and dividend stability.

 

Delving into Hero's dividend track record unveils a commitment to shareholder value, with an average dividend per share of Rs. 95.4 over the past five years. FY21 witnessed the highest dividend payout at Rs. 105 per share, highlighting Hero's consistent efforts to reward its stakeholders. With a dividend payout ratio averaging 63% against its earnings per share, Hero Motocorp strikes a harmonious balance between reinvestment for growth and generous returns for shareholders, reflected in its average dividend yield of 4.2% over the past five years.

 

Particulars Amount Particulars Amount
CMP 4709.45 Market Cap (Cr.) 98131.00
EPS 140.62 Stock P/E (TTM) 29.19
ROE (%) 0.1837 ROCE (%) 0.25
Promoter Holding (%) 0.3477 FII Holding (%) 0.27
Dividend Yield (%) 0.0204 Price to Book Value 5.55
Operating Profit Margin (%) 0.1343 Net Profit Margin (%) 0.08

 

Bajaj Auto:

Bajaj Auto, steeped in the rich heritage of the Bajaj Group, boasts a legacy that dates back to 1948, when it embarked on its journey as an importer of two-wheelers. The pioneering spirit of the company was evident from the outset, as it introduced the iconic Vespa 150 to Indian roads under license from its Italian manufacturer, Piaggio.

 

A significant turning point arrived in 1971 when Bajaj Auto ventured into the three-wheeler segment, revolutionizing urban transportation by offering efficient goods transport solutions in towns and cities. This commitment to innovation continued in 1977 with the launch of the Bajaj-RE, colloquially known as the auto taxi, which swiftly became a staple for short-distance travel across India.

 

In 2001, Bajaj Auto's innovation prowess shone once again with the introduction of the Pulsar brand, marking a milestone in the two-wheeler market with its instant popularity. Over the years, Bajaj Auto forged strategic partnerships with globally renowned brands like Kawasaki, KTM, and Triumph, solidifying its reputation for offering high-performance bikes at affordable price points.

 

Bajaj Auto's manufacturing prowess is evident through its four state-of-the-art manufacturing units located across Maharashtra and Uttarakhand, collectively boasting a formidable capacity to produce 1.2 lakh Chetak scooters, 57 lakh motorcycles, and 9.3 lakh commercial vehicles annually.

 

Today, Bajaj Auto proudly stands as the flagship company of the Bajaj Group, emerging as one of the largest manufacturers of motorcycles and three-wheelers globally. Its global footprint extends to over 79 countries, with exports accounting for a substantial 52.7% of the company's total sales.

 

Financially, Bajaj Auto continues to chart a steady course of growth, evidenced by its FY23 revenue of Rs. 37,643 crore, marking a commendable 9% increase from the preceding fiscal's Rs. 34,429 crore. However, net profits witnessed a marginal 2% dip during the same period, settling at Rs. 6,060 crore from Rs. 6,166 crore in FY22.

 

An intriguing development in January 2024 saw Bajaj Auto's management approve a share buyback worth Rs. 4,000 crore, signaling confidence in the company's intrinsic value. This move reflects Bajaj Auto's commitment to enhancing shareholder value.

 

In terms of valuation, Bajaj Auto trades at a Price to Earnings (P/E) ratio of 28x, offering investors an insight into the market's perception of its growth prospects. Additionally, the company maintains a respectable dividend yield of 1.9%, showcasing its commitment to rewarding shareholders.

 

Bajaj Auto's dividend track record is noteworthy, with an average dividend per share of Rs. 120 over the past five years. The company has consistently maintained a dividend payout ratio of 71% against its earnings per share, translating to an average dividend yield of 3.85% over the past five years. This consistent dividend policy underscores Bajaj Auto's commitment to creating enduring value for its shareholders.

 

Particulars Amount Particulars Amount
CMP 8013.35 Market Cap (Cr.) 204212.00
EPS 212.5 Stock P/E (TTM) 27.59
ROE (%) 0.205 ROCE (%) 0.26
Promoter Holding (%) 0.5498 FII Holding (%) 0.14
Dividend Yield (%) 0.0194 Price to Book Value 6.96
Operating Profit Margin (%) 0.2029 Net Profit Margin (%) 0.16

 

Bosch:

Bosch, a stalwart in technology and services, commands a global presence across multiple sectors, including mobility, industrial technology, consumer goods, and energy & building technology. With a sprawling network of over 468 subsidiaries spanning 60 countries and a workforce exceeding 4.2 lakh individuals, Bosch epitomizes innovation and excellence on a global scale.

 

In India, Bosch's journey commenced in 1951, blossoming into a formidable force with a workforce of over 39,000 spread across 17 manufacturing units and 7 development application centers nationwide. Notably, Bosch houses the largest development center outside Germany, a testament to its commitment to engineering and technological prowess.

 

Within the Indian market, Bosch operates across three key segments. The Mobility Solutions segment, Bosch's cornerstone, accounts for a significant 88% of its revenue. Here, the company manufactures electric powertrains and aftermarket parts for automotive applications, solidifying its position as a leader in the mobility domain.

 

The Consumer Goods segment emerges as Bosch's second-largest revenue contributor, offering a diverse range of consumer durables such as mixer grinders, ovens, gas cooktops, chimneys, washers, dryers, and more. This segment resonates with consumers seeking high-quality, innovative home appliances.

 

The Energy & Building Technology segment, although the smallest, plays a pivotal role by offering turnkey solar PV services, security systems, and energy-efficient solutions, aligning with Bosch's commitment to sustainability and technological advancement.

 

Financially, Bosch's performance reflects its robust market standing, with FY23 operating revenue soaring to Rs. 14,929 crore, marking an impressive 27% growth from the previous fiscal's Rs. 11,782 crore. However, net profit growth was relatively slower at 17%, reaching Rs. 1,425 crore from Rs. 1,218 crore in FY22, primarily attributed to escalating material costs.

 

Market dynamics have propelled Bosch's stock, witnessing a remarkable 56% rally over the past year, driving the Price to Earnings (P/E) ratio to 51x. At its current market price exceeding Rs. 27,000, Bosch maintains a dividend yield of approximately 1.8%, reflecting its commitment to shareholder returns.

 

Bosch's dividend track record is commendable, with an average dividend per share of Rs. 203 over the past five years. FY19 saw the highest dividend payout at Rs. 203 per share, underscoring Bosch's consistency in rewarding shareholders. The company has maintained a dividend payout ratio averaging 58% against its earnings per share, despite its relatively high P/E ratio of 43x, translating to an average dividend yield of 1.3% over the past five years. This balanced approach reflects Bosch's strategic focus on sustainable growth and shareholder value creation.

 

Particulars Amount Particulars Amount
CMP 27194 Market Cap (Cr.) 78455.00
EPS 483.22 Stock P/E (TTM) 51.23
ROE (%) 0.1322 ROCE (%) 0.18
Promoter Holding (%) 0.7054 FII Holding (%) 0.04
Dividend Yield (%) 0.018 Price to Book Value 6.77
Operating Profit Margin (%) 0.148 Net Profit Margin (%) 0.09

 

The list below puts together 10 Best Automotive Stocks with High Dividend Yield :

 

Name CMP Mkt Cap Div Yield (%)
Banco Products 600.50 4778.52 0.03
Rane Brake Lining 961.00 671.49 0.03
Hero Motocorp 4588.00 98131.00 0.02
Bajaj Auto 8751.00 204212.00 0.02
Bosch 30085.00 78455.00 0.02
Munjal Auto Industries 81.30 972.00 0.02
Automotive Axles 1917.00 3107.07 0.02
Jamna Auto Industries 134.60 5097.48 0.01
Ashok Leyland 198.75 52630.00 0.01

 

Conclusion:

 

Wrapping up our exploration of the Best Automotive Stocks with High Dividend Yield, we glean insights into the intricate dynamics of the automotive industry. It's a realm characterized by low margins yet high volumes, navigating through razor-thin profit margins and cyclical fluctuations that can swiftly plunge companies into losses during downturns.

 

However, amidst these challenges, the stocks featured in our list showcase resilience and strength, boasting high return ratios that underscore their operational efficiency and strategic prowess. These companies have already solidified their manufacturing capacities, requiring relatively low capital expenditures to maintain operations. This strategic advantage positions them well to capitalize on periods of industry growth, translating into potentially lucrative dividends or buybacks to reward shareholders.

 

So, what's your take on these companies? Do you see greater value and potential in these stocks given their robust fundamentals and dividend-paying track records? We'd love to hear your thoughts and insights in the comments below.

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