For investors in India looking to build a steady stream of passive income, dividend-paying stocks continue to be a cornerstone of a balanced portfolio. These companies share a part of their profits directly with shareholders, offering a potential source of regular cash flow alongside the opportunity for long-term capital appreciation. While large-cap stocks often dominate the conversation, the small-cap segment harbors several compelling names that deliver robust dividend yields, sometimes exceeding those of their larger counterparts.
Understanding Dividend Yield and Small-Cap Opportunities
The attractiveness of a dividend stock is frequently measured by its dividend yield. This key metric is calculated by dividing the annual dividends paid per share by the stock's current market price. A higher yield indicates greater income potential for each rupee invested. However, savvy investors look beyond just the yield. They scrutinize the company's underlying profitability, the sustainability of its cash flows, and broader sectoral trends before committing capital.
According to a recent compilation of data by Axis Securities, several small-cap companies stand out for their impressive dividend distributions. These firms have demonstrated not only the ability to generate consistent profits but also a shareholder-friendly policy of returning a significant portion of those earnings. The following list highlights ten such small-cap stocks, each offering a dividend yield of 6% or higher, presenting a blend of income and resilience.
Leading High-Yield Small-Cap Dividend Stocks
1. MSTC Ltd. tops the list with a remarkable dividend yield of 8%. With a current market price (CMP) of ₹479, the company distributed a total of ₹36.5 per share in dividends over the past year. Its 2025 payouts included a substantial second interim dividend of ₹32 per share in February and a third interim dividend of ₹4.50 (ex-date April 2, 2025). The previous year, 2024, also saw multiple distributions, reinforcing its strong cash flow position.
2. PTC India Ltd., a key player in the utilities sector, offers a 7% yield. At a CMP of ₹158, its total dividend payout over the last twelve months amounted to ₹11.7. The company maintained its reliable payer status in 2025 with an interim dividend of ₹5.00 (ex-date May 5) and a final dividend of ₹6.70 per share (ex-date August 1).
3. Castrol India Ltd. continues to reward its shareholders handsomely, providing a 7% yield. Based on dividends totalling ₹13 and a CMP of ₹184, the lubricant major announced a final dividend of ₹9.50 (including a ₹4.50 special dividend) with an ex-date of March 18, 2025, and an interim dividend of ₹3.50 with an ex-date of August 10, 2025.
4. Thyrocare Technologies Ltd., the diagnostics specialist, matched the 7% yield mark. With a CMP of ₹429 and ₹28 in dividends, the company declared a final dividend of ₹21 per share (record date July 25, 2025) and an interim dividend of ₹7 (record date October 24, 2025). This period also saw a notable 2:1 bonus issue around the October payout.
5. CESC Ltd. provides dependable income with a 6% dividend yield. The company, with a CMP of ₹171, paid out ₹10.5 per share over the past year. Its 2025 distributions included two interim dividends: ₹4.50 (ex-date January 16) and ₹6.00 (ex-date October 27), the latter following strong quarterly results.
6. Honda India Power Products Ltd. stands out in the industrial segment, delivering a 6% yield. Despite a higher CMP of ₹2,336, the company distributed a significant ₹131.5 per share over the last year. Its 2025 payouts featured a ₹10 special/interim dividend (record date February 18) and a ₹21.50 final dividend for FY25 (record date September 18), reflecting a solid financial foundation.
Key Considerations for Dividend Investors
While high yields are attractive, they must be evaluated in context. A sustainable dividend is backed by strong and recurring profits, not one-time gains. Investors should examine the company's dividend payout ratio—the proportion of earnings paid as dividends—to assess sustainability. Furthermore, the stability of the business model and sectoral headwinds or tailwinds play a crucial role in the continuity of these payouts.
The small-cap universe, while offering higher potential yields, can also carry greater volatility and business risk compared to large-cap stalwarts. Therefore, a diversified approach is essential. Including such high-yield small-caps as a part of a broader, well-researched portfolio can enhance overall income generation while managing risk exposure.
In conclusion, for income-focused investors willing to delve into the small-cap space, these companies present noteworthy opportunities. The consistent dividend history of firms like MSTC, PTC India, and Castrol India highlights their commitment to shareholders. As always, thorough due diligence that looks beyond the headline yield figure is the key to successful long-term income investing in the stock market.
