Rs 10,500 cr cash, zero debt: Why this high-dividend-yield PSU could pay bigger dividends

Its revenue and net profit have grown at a 15% and 35% CAGR over the last five years, while the stock price has returned at a 23% CAGR during the same period. For FY26, the company returned 36.3% of its Net Profit to shareholders as dividend distributions, compared to 36.2% in FY25. Significantly, the company's net profit has nearly doubled (by exactly 97%) to ₹5,816.8 crore during the FY22-26 period.

Over the same period, dividend per share has increased by 76.9%. FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now For FY26, it declared a dividend of ₹2,112.1 crore. This payout included three interim dividends totalling ₹1928.5 crore and a final dividend of ₹183.6 crore. The dividend yield stood at 3.5%.

The company is NALCO. NALCO Share Price NALCO Dividend History: How a 97% Profit Jump Boosted FY26 Payouts to ₹11.5/Share NALCO paid a per-share dividend of ₹11.5 in FY26, translating into a dividend yield of 3.5% at the current price (as of October 16) of ₹324. During the year, the company paid three interim dividends totalling ₹10.5 and a final dividend of ₹1.0 per share. The dividend per share has risen 76.9% from ₹6.5 in FY22 to ₹11.5 in FY26, despite a cyclical contraction to ₹4.5 in FY23.

Historical Dividend Payout Track Record Financial YearDividend/ShareNet Profit (In Crores)Payout RatioFY22₹6.5₹2,952.040.1%FY23₹4.5₹1,544.555.4%FY24₹5.0₹2,060.044.6%FY25₹10.5₹5,324.736.2%FY26₹11.5₹5,816.836.3%Source: Annual Report, Financialexpress.com Operational Engines: How Alumina and Chemicals Split the ₹17,843 Cr Topline The alumina refinery produces 21 lakh tonnes of alumina hydrate annually.

The aluminium smelter has a capacity of 4.6 lakh tonnes per annum. In FY26, the total revenue from operations stood at ₹17,843.05 crore, up 6.3% from the previous year. This revenue is distributed among the aluminium division (72.4%), the chemical division (27.4%) and others (0.2%). Domestic sales rose by 17% to ₹13,027.7 crore, accounting for 73.0% of revenue, driven by strong domestic industrial demand.

Meanwhile, export sales declined by 15% to ₹4,701.5 crore, representing the remainder (26.4%) and others (0.6%). In FY26, EBITDA (earnings before interest, taxes, depreciation, and amortisation) rose by 8.7% to ₹8,613 crore, while the margin increased from 47.2% to 48.3%. Consequently, net profit grew by 9.2% to ₹5,816.8 crore. NALCO returned 36.3% of this net profit to shareholders as dividends. As per DIPAM guidelines for Central Public Sector Enterprises, NALCO maintains a minimum annual dividend payout of 30% of Profit After Tax (PAT) or 4% of net worth, whichever is higher.

Historically, over the past five financial years, NALCO has maintained a payout of more than 35%. Although the payout ratio has declined recently due to strong profit growth, the company’s dividend capacity remains linked to its earnings performance. If NALCO sustains its historical profit growth trajectory, rising earnings could support higher dividend payments in absolute terms, even if the payout ratio remains lower than its historical average.

Volume Expansion: From 3.1 MTPA Refinery Scale to Argentine Lithium Assets There is a structural tailwind for the business. India's per capita aluminium consumption stands at 3.4 kg, compared to the global average of 12 kg, leaving substantial room for domestic market expansion. Demand is driven by government investments in infrastructure, railways, power grids, renewable energy, and electric vehicles.

Indian aluminium consumption grew 11.4% in FY26. NALCO is among the lowest-cost producers of bauxite and alumina globally. To capitalise on the demand, the company is expanding its annual alumina refinery capacity from 21 lakh tonnes to 31 lakh tonnes. Production is targeted to begin in October 2026. This could help expand volume. The company is also expanding its operations to source critical minerals.

Through a joint venture called 'Khanij Bidesh India Limited' (KABIL), NALCO is securing rights to explore lithium in Argentina to strengthen the domestic battery supply chain. NALCO holds a 40% equity stake in KABIL. Cash Flow Forensic: How ₹6,438 Crore Operating Inflows Converted to ₹4,413 Crore Free Cash Out of revenue of ₹17,843.05 crore in FY26, NALCO generated a net cash flow of ₹6,438.0 crore from operating activities.

This is higher than the ₹5,806.1 crore recorded in FY2025. Operating profit before working capital changes reached ₹7,997.6 crore. After investing ₹2,025 crore in fixed assets, it generated free cash of ₹4,413 crore, down from ₹4,641 crore in FY25. Historical Free Cash Flow Trend (In Crores) Financial YearOperating CashNet CapexFree Cash FlowFY22₹3,959.0₹1274.0₹2,685.0FY23₹908.0₹1,525.0₹-617.0FY24₹2,720.0₹1,645.0₹1,075.0FY25₹5,806.0₹1,165.0₹4,641.0FY26₹6,438.0₹2,025₹4413.0Source: Screener.in Management states that after covering routine capex of around ₹1,500 crore and paying annual dividends, NALCO retains an incremental net cash surplus of over ₹3,500 crore every year from internal accruals.

This cash serves as a strong foundation for dividend payments, which are safeguarded under DIPAM’s dividend policy. As long as the company remains profitable, dividend payments can continue and may even increase. The company expects to maintain annual net profit of ₹6,000+ crore, providing strong recurring inflows to back regular dividend distributions. NALCO also held cash and bank balances of ₹8,407.7 crore as of March 31 2026, up 55% from ₹5,426.7 crore in FY25.

The ₹10,500 Crore Cash Fortress: How NALCO Funds Capex Without a Rupee of Debt By June 30, 2026, total net cash reserves had grown to over ₹10,500 crore. Furthermore, NALCO operates as a zero-debt company, with no long-term debt. As there are no obligations for interest expenses or principal repayments, operating cash flow is directed entirely toward funding capex and dividend payments. Brownfield smelter expansions are financed from internal deposits and cash reserves, without market borrowing.

For JV projects such as power plants, debt is raised at the JV company level (70:30 debt-to-equity ratio), reducing NALCO's direct equity contribution and preserving cash. The Self-Funded Horizon: Evaluating the ₹25,000 Cr Zero-Debt Capex NALCO’s ₹25,000 crore capex by FY31 will also be funded entirely through internal cash accruals and existing cash reserves without borrowing. Further, the financial performance has strengthened in Q1FY27.

3% year-on-year to ₹5,302.0 crore in Q1FY27. EBITDA grew 78.4% to ₹2,881 crore while margin expanded to 54.3%, compared to 42.4% in Q1 FY26. Net profit rose 88.2% to ₹2,002 crore, accounting for nearly one-third of FY26 net profit. If this growth momentum sustains, then it could surpass last year’s net profit and even its payout. The Dividend Hunter Verdict NALCO’s dividend story is supported by strong earnings growth, healthy cash flows and a debt-free balance sheet.

Net profit has nearly doubled, while the dividend per share has increased from ₹6.5 to ₹11.5 during the last five years. The company distributed 36.3% of its FY26 net profit as dividends, supported by strong cash flows and substantial cash reserves. The company’s expansion plans and rising domestic aluminium demand could further support earnings growth. Its planned ₹25,000 crore capex by FY31, funded through internal accruals and existing cash reserves, also reduces dependence on external borrowing.

Strong Q1FY27 results, with net profit rising 88.2% year-on-year to ₹2,002 crore, further strengthen the earnings outlook. However, aluminium price volatility, execution risks and capital expenditure requirements could influence future dividend growth. Nonetheless, under DIPAM guidelines, NALCO is required to maintain a minimum annual dividend payout of 30% of PAT or 4% of net worth, whichever is higher.

This provides a policy-backed basis for dividend distributions, subject to profitability and applicable requirements. NALCO offers a combination of regular dividends, strong cash generation and potential earnings growth, although future payouts will depend on sustained profitability and capital allocation priorities. Valuation Check: 5.2x EV/EBITDA Signals Discount vs. Aluminium Sector Peers Valuation also offers some comfort.

NALCO trades at an EV/EBITDA multiple of 5.2x, below its five-year median of 5.4x and the Aluminium sector multiple of 13.6x. Dividend Hunters can keep this stock on their watchlist. Disclaimer: Note: Throughout this article, we have relied on data from and the company's investor presentation and conference call. We used an alternative, widely accepted source of information only when the data were unavailable.

The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, we strongly advise you to consult your advisor. This article is strictly for educational purposes only. About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing.

With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends. A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world. Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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