What if you were to know today that two government-backed ‘Cash Cows’ are on a sale? That is what we dive into today. Two government-backed giants, one of which is now managed by a private corporate group, which have ROCE (Return on Capital Employed) of over 45%, delivering dividend yields of over 5%, both trading at 30% discount to their recent highs.
Both these stocks are trading at a discount despite their strong track record and government backing. Strong business fundamentals and records, but stock price dipping is what smart investors look at like an opportunity. It’s like getting your hands on some luxury brand merchandise at a clearance sale price.
The big question is, as 2025 ends, will these government-backed dividend ‘dhurandhars’ continue their streak or will 2026 break it? Let us try and find out.
#1 Coal India: The 6.9% Yield Stock Hiding in Plain Sight
Incorporated in 1973, Coal India Ltd is a ‘Maharatna’ company under the Ministry of Coal, Government of India with headquarters at Kolkata, West Bengal. It is the single largest coal producing company in the world and one of the largest corporate employers.
With a market cap of Rs 2,36,341 cr, Coal India Ltd is into mining and production of Coal. The major consumers of the company are power and steel sectors.
The President of India, through the Ministry of Coal, holds 63% stake in the company. Also, Life Insurance Corporation of India holds another 11% stake.
The company has a current dividend yield of 6.9%, one of the highest when compared to industry peers. In fact it will be fair to say that this is a very high dividend yield in general as well. In simple words, for every Rs 100 invested in the company’s stock, at the current market price, an investor receives almost Rs 7 annually as dividend.
The company has also maintained a healthy dividend payout of 46%, turning dividends as a possible separate stream of income for many investors.
Add to that the company’s current ROCE of 48%, while the industry median is 34%. Which means that for every Rs 100 the company uses as capital, it makes a profit of Rs 48 on it, while industry peers average Rs 34.
Looking at the financials, the company’s sales were at Rs 96,080 cr for FY20 which has jumped to Rs 143,369 cr as for FY25, logging a compound growth of 8% in 5 years. And for H1FY26, sales of Rs 66,000 cr have been logged.
The EBITDA (earnings before interest, taxes, depreciation, and amortization) for Coal India Ltd grew at a compounded rate of 17% from Rs 21,581 cr in FY20 to Rs 47,064 cr in FY25. For H1FY26, the EBITDA recorded is Rs 19,237 cr.
The net profits more than doubled from Rs 16,700 cr in FY20 to Rs 35,302 cr in FY25, logging in a compounded growth of 16%. And for H1FY26, the company has logged profits of Rs 13,000 cr.
The share price of Coal India Ltd went from around Rs 135 in December 2020 to Rs 384 as on 17th December 2025, which is a jump of 185% in 5 years.
At the current price of Rs 384, the stock is trading at a discount of almost 30% from its all-time high price of Rs 545.
The company’s share is trading at a current PE of 8x, while the industry median is 12x. The 10-year median PE for Coal India Ltd is 7x, while the industry median for the same period is 11x.
In the last annual report for FY25, the company’s Managing Director, P M Prasad said, “Our vision is to ensure that there is no shortage of coal in the country, providing a reliable and steady supply to meet the nation’s energy needs. Coal India aims to be a commercially viable, contemporary, and professional organisation that is consumer-friendly and aligned with national developmental goals.”
#2 Hindustan Zinc: The Silver-Lined Monopoly with 60% ROCE
Incorporated in 1966, Hindustan Zinc Ltd is in the Zinc-Lead and Silver business. It is the world’s 2nd largest integrated Zinc producer and the 3rd largest silver producer globally.
With a market cap of Rs 2,43,125 cr, the company has a market share of ~75% of the growing Zinc market in India and is self-sufficient in power with captive thermal power plants and has ventured into green energy by setting up wind power plants.
The President of India holds 28% stake in the company. The company is now part of the Vedanta Group, with the President of India being a significant shareholder.
The company has a current dividend yield of 5%, while the industry median when compared to peers is just 2.5%. The company has maintained a dividend payout of 119%, which in simple words means that that for every Rs 100 of net profit the company generated, it distributed Rs 119 as dividend.
The company’s current ROCE is also an enviable 61%, while the industry median is 42%. Which means that for every Rs 100 the company uses as capital, it makes a profit of Rs 61 on it, while industry peers average Rs 42.
Coming to the financials, the company’s sales were at Rs 22,629 cr for FY21 which has jumped to Rs 34,083 cr for FY25, logging a compound growth of 11% in 4 years. And for H1FY26, sales of Rs 16,320 cr have been logged.
The EBITDA for the company grew at a compounded rate of 11% from Rs 11,672 cr in FY21 to Rs 17,431 cr in FY25. For H1FY26, the EBITDA recorded is Rs 8,304 cr.
The net profits jumped from Rs 7,980 cr in FY21 to Rs 10,353 cr in FY25, logging in a compounded growth of 7%. And for H1FY26, the company has logged profits of Rs 4,883 cr.
Given the surge in the price of silver, one of the company’s key products, it will be interesting to see how it boosts profits in time to come, as old hedges wind down and the full benefit of higher silver prices starts to flow in.
The share price of Hindustan Zinc Ltd was around Rs 240 in December 2020 and as on 17th December 2025 it was Rs 576, which is a jump of 140%.
At the current price of Rs 576, the stock is trading at a discount of 29% from its all-time high price of Rs 808.
The company’s share is trading at a current PE of 23x, and the industry median is 38x. The 10-year median PE for Hindustan Zinc Ltd is 16x, while the industry median for the same period is 36x.
The company is evaluating the idea to create separate legal entities for undertaking the Zinc & Lead, Silver, and Recycling business of the Company for unlocking potential value. As per the October 2025 earnings call and presentation, the management is still supportive as they say they believe the process is right. However, they are arguing valuation upside, especially given silver price strength.
Cash Cows for Watchlist 2026?
With dividend yields of nearly 7% and 5% respectively, the two Government of India backed stocks that we saw today, Coal India Ltd and Hindustan Zinc Ltd (now managed by the Vedanta Group), have been catching the eye of many smart investors. Not to forget their high ROCE which proves their mastery in managing cash.
Coal India, coming from a ‘Sunset Sector,’ has faced a lot of hurdles in the past years due to the global push for green energy. But it is now gaining its place back given tight cost controls and other factors involved in the transition to green energy. And Hindustan Zinc has been a steady grower and a leader in its niche. The company ofcourse stands to benefit from the surge in the price of silver. The common thread is that they are both backed by the Government of India.
For investors who keep looking for stocks delivering solid dividend yield to get more passive income, these stocks could turn out to be a golden opportunity. So, it would be a wise decision to keep an eye on both stocks, follow their movements, look at the risks, and decide if these are worthy of a place in the Watchlist 2026.
In conclusion, here’s something to think over. A fixed deposit gives a fixed rate of return. If done with a high-quality bank there is little chance of any surprise, especially in terms of a capital loss. Investing in stocks for regular income is an idea which comes with a catch – there could be a capital loss. Also, companies may change their dividend policies at will, which could also impact the anticipated income. Hence, while the dividend yields could be comparable with a fixed deposit, the nature of the two is very different. So, do keep that in mind when thinking about how to invest your monies.
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.
Disclaimer:
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.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
