Top 7 Debt Free Company Stocks For 2023 With Dividend High Yields

Debt is borrowed money for a certain period of time that has to be returned with interest. In business it is one of the crucial part which speaks volumes of any company's financial position. There are few companies that are debt free and being debt free has many benefits.

To run a company funds are required which can be sourced by three ways; internally through profits, liquidating equity shares and borrowing from bank or financial institution. Borrowing money leads to debt financing and it has to be repaid at a pre-decided future date along with interest.

Importance of being debt-free
Interest at which it is borrowed will now rise, as after the repo rate hike to curb the inflation, the rate for borrowing has increased. The borrower now will have to pay extra, as the additional cost is a heavy dent on company funds, can dampen the profits who will pay out less dividends. So, investing in debt free companies is attractive as these companies are not saddled with higher financing expenses when the interest rates are raised, thus keeping a lid on their overall costing.

A debt free company has a zero debt to equity ratio, which indicates the level of risk associated with a company's financial structure and management. The ratio points out how much debt a company is leveraging it to churn into earnings. The liabilities and commitments held by the organization to repay them over time are referred to as debt.

Business executives who understand the benefits, nuances, and significance of the debt-to-equity ratio may use it to help their company compete in competitive marketplaces. Because a high debt-to-equity ratio lowers a bank's odds of being repaid, it may refuse to offer additional funding or only supply it in unfavorable conditions.

If a debt-to-equity ratio is 2 and the bank's cutoff is 1.5, you'll probably be denied a loan. A lower debt-to-equity ratio indicates that a business is less reliant on debt and has a better equity position. Debt to Equity Ratio =(Total Liabilities)/(Total Shareholder Equity).

Benefits of being-debt free
Here are top 3 benefits of being debt free

• With no debt strings attached, there is no interest repayment burden, thus insulating debt-free companies from the changes of the interest rate regime.
• The company likely has strong fundamentals, self sufficient and stable to run its operations, thus it can pay higher dividend yields.
• A zero-debt company also indicates, there are no creditors to lay claims over the company's assets. It also provides debt-free companies with the bandwidth to borrow in case of any emergencies.

Here are top 7 companies that are debt-free

1. Oracle Financial Services Software Limited
Oracle Financial Services is a subsidiary of Oracle Corp, US. The company largely caters to the banking and insurance software services industry. Based on the current market price of Rs 3210 and the last year's dividends of Rs 190 per share, the dividend yield works to 5.94%. We believe that in the future too, Oracle Financial Services would be able to maintain its dividends. The stock of Oracle Financial Services has fallen from a 52-week high of Rs 3749, as investors have sold into IT Stocks on rising interest rates and fears of recession in the US.

The latest stock price is Rs 3206.70 per share and the current market capitalisation is Rs 27,704.22 crore.

2. Goodyear India Limited
It offers wide range of high performance car tyres, SUV and 4x4 Tyres online.
The latest price of the stock is Rs 1062.55 per share, its current market capitalisation is Rs 2,450.93 crore and the dividend yield is 9.35%

3. Life Insurance Corporation of India
It is one of the largest Insurance company in India, which was listed lasted year. Its dividend yield at the current share price of Rs 572.45 results in 0.26% and the current market capitalisation is Rs 3,62,200.99 crore.

4. HDFC AMC
It is one of the largest asset managemnt companies in India that has a market capitalisation of Rs 35,897.81 crore and based on the current market price of Rs 1,682. 65 per share of the stock the dividend yield results in 2.50%.

5. Bharat Electronics Limited
It is an Indian Government-owned aerospace and defence electronics company. It manufactures advanced electronic products for ground and aerospace applications. It is one of nine PSUs under the Ministry of Defence of India. The current market capitalisation is Rs 67,148 crore and based on the current market price of Rs 91.9 per share its dividend yield is 1.63 %.

6. Siemens Limited
Siemens Limited is a technology company focused on industry, infrastructure, digital transformation, transport as well as transmission and generation of electrical power. It is the flagship listed company of Siemens AG in India. Its current market capitalisation is Rs 1,16,344 core. Its last dividend was paid in January 2023, and based on current market price of Rs 3,264 per share it results in 0.31%.

7. GlaxosmithKline Pharma
Based on last year's dividend of Rs 90 per share, the dividend yield on the stock works to 7.14%, which is not bad at all. The current market price of the stock is Rs 1259. 7.14 per share.

Important thing about dividends in this article
We could have factored in special dividends and one off-dividends. It is highly possible that such companies maybe included in the list. Sometimes companies tend to declare huge dividends on account of sale of an asset. Apart from this another important think to remember is that dividends would not be consistent or the same every year. So, we have not factored that as well in our current write-up.

Disclaimer
This article is for information purposes only and highlights stocks that declared a good on dividends. The article should be treated as informational and not an advisory to invest. Neither the author, nor Greynium Information Technologies Pvt Ltd should be held responsible for decisions based on this article.