When smart investors look for stocks to pick, they are very particular about a few parameters. They look for the company’s ability to efficiently manage money. In simple terms, they look for companies that use profits to keep operations debt free.
Without heavy interest payments, the company has money at its disposal that it can use for growing the business, buying back shares or giving back to investors by means of dividends.
Here are two lesser-known small cap stocks that are checking all the boxes when it comes to being debt free and using the profits to give back to their investors by means of dividends.
#1 Honda India Power Products Ltd: Beating an otherwise flat market with 5.5% yield
Incorporated in 1985, Honda India Power Products Ltd is engaged in manufacturing and marketing of portable gensets, water pumps, general purpose engines, lawn mowers, brush cutters and tillers.
In July 2020, the company changed its name from ‘Honda Siel Power Products Ltd’ to ‘Honda India Power Products Ltd.
With a market cap of Rs 2,425 cr, the company is part of the Honda Group, a multinational conglomerate manufacturer of automobiles, motorcycles, and power equipment headquartered in Tokyo, Japan.
The company is almost debt free and has a current dividend yield of 5.5% (as per Trendlyne), possibly among the highest when compared to peers from the same industry. Which means that for every Rs 100 invested in the company one would get back Rs 5.5 a year in dividends.
No wonder domestic institutional investors like Nippon India, Tata Mutual Funds and Quant Mutual Funds have 8.8%, 5.25% and 4.3% stake respectively in the company as of the quarter ending September 2025.
The financials of the company tell a different story.
The company’s sales have seen a jump over the last 5 years but have seen a drop in the most recent financial year.
| FY | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| Sales/Rs Cr | 849 | 939 | 1,156 | 1,246 | 989 | 794 |
For H1FY26, sales of Rs 331 cr have been recorded.
The EBITDA (earnings before interest, taxes, depreciation, and amortization) has also seen a similar trajectory.
| FY | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| EBITDA/Rs Cr | 93 | 73 | 103 | 135 | 99 | 88 |
And for H1FY26, EBITDA of Rs 19 cr has been logged.
As for the net profits, the company has seen a drop in FY25…
| FY | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| Profit/Rs Cr | 67 | 49 | 75 | 85 | 92 | 80 |
For H1FY26, profits of Rs 20 cr have been recorded.
The share prices of Honda India Power Products Ltd were around Rs 1,016 in December 2020, and as on 2nd December 2025 it was Rs 2,404, which is a jump of over 135% in 5 years.
As for valuations, the company’s current PE is 32x, while the current industry median is 34x. The 10-year median PE for the company is 25x and the industry median for the same period is 29x.
In the past 12 months, Honda Power has declared an equity dividend amounting to Rs 131.50 per share.
#2 India Motor Parts & Accessories Ltd: Dividend yield of 2.9%
Incorporated in 1954, India Motor Parts & Accessories Ltd is engaged in the distribution of automobile spare parts and accessories through its distribution network representing over 50 manufacturers.
With a market cap of Rs 1,270 cr, the company is a part of the TSF Group and caters to more than 40 auto component manufacturers including Brakes India, Rane (Madras) Limit, Sundram Fasteners and ZF Commercial Vehicle Control Systems India.
The company is almost debt free and has a current dividend yield of 2.9% (as per Trendlyne), while the current industry median is 2.6%.
Let us look at the financials of the company. (These are standalone figures as the annual consolidated figures for FY25 are not available on screener or trendlyne)
The company’s sales have seen a compounded growth of 7% in the last 5 years.
| FY | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| Sales/Rs Cr | 519 | 518 | 628 | 708 | 741 | 789 |
For H1FY26, sales of Rs 395 cr have been recorded.
The EBITDA has grown at a compounded rate of 12% in the last 5 years.
| FY | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| EBITDA/Rs Cr | 35 | 44 | 57 | 62 | 57 | 62 |
And for H1FY26, EBITDA of Rs 29 cr has been logged.
The net profits of the company have seen a 15% compounded growth in the last 5 years.
| FY | FY20 | FY21 | FY22 | FY23 | FY24 | FY25 |
| Profit/Rs Cr | 49 | 50 | 57 | 74 | 74 | 84 |
For H1FY26, profits of Rs 46 cr have been recorded.
The share price of India Motor Parts & Accessories Ltd was around Rs 525 in December 2020, and as on 2nd December 2025 it was Rs 1,018 which is a jump of 94% in 5 years.
A value trap or hidden gem?
The stock is trading at just 0.5 times of its book value, making it a classic Benjamin Graham style cigar-butt stock. It is cheap for a reason (holding company structure), but financially very safe compared to a distressed company.
As for valuations, the company’s current PE is 14x, while the current industry median is 11x. The 10-year median PE for the company is 18x and the industry median for the same period is 13x.
In the past 12 months, India Motor Parts has declared an equity dividend amounting to Rs 30 per share.
The definite debt-dividend duo?
The two stocks we saw today are silently giving back to its investors by means of dividends. With a dividend yield that is making peers envious, the companies are also debt free, which gives them the freedom to use the money they would otherwise pay towards hefty interest payments, towards growing the business and/or paying back to investors.
And that is what they are exactly doing. While the financials for both companies are not completely in the green when it comes to net profits, both show promise and a hold on capital utilisation, which is a green flag for many smart investors.
The question now remains if these two lesser-known companies that are beating some of the biggest names in terms of dividend yields, continue their streak. Only time will tell. But it would be smart to add these stocks to a watchlist and keep an eye on them.
Note: We have relied on data from www.Screener.in and www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
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, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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