IRFC, Indian Oil: These 2 Dividend Paying PSU Stocks Well-Poised For Fresh Buying, 17-32% Rise Seen

Indian Railway Finance Corporation (IRFC) and Indian Oil Corporation (IOCL) are two of the cheapest PSU stocks with the potential for strong returns. Both are from diverse segments, one is backed by Indian Railways and is an NBFC, while the other is a government-backed leading oil marketing company. Both are also among the top dividend-paying stocks. The two stocks are expected to give a potential 17% to 32% upside.

IOCL has recorded a historic peak, while IRFC has witnessed slight corrections after a strong rally in Q2. But both are seen to propel for fresh upside ahead.

Indian Oil Corporation:

On December 6th, IOCL shares ended at Rs 119.30 apiece, up by 1.4% on BSE, after hitting an all-time high of Rs 119.95 apiece on the day. The m-cap is over Rs 1.68 lakh crore.

The company paid about Rs 8 per share dividends in the past 12 months and has a dividend yield of 6.90%. Year-to-date, the stock has rallied nearly 53%.

Avdhut Bagkar, Derivatives & Technical Analyst, StoxBox said, "The price action has seen elevated interest in the counter post hitting a new historic peak in recent sessions. The current momentum, which has gained over 7 per cent in a week, may see some profit booking, however, the underlying momentum continues to see greater interest in terms of accumulation."

Bagkar added, "A healthy dip towards 110 could add preferred momentum and a successive corrective wave, kicking off a reversal that could reach 140 level."

In Q2FY24, the company posted a net profit of Rs 13,713 crore, compared to a loss of Rs 910 crore in Q2FY23. Revenue from operations for the July-September quarter declined 11.9% to Rs 2.05 trillion in Q2FY24 as against Rs 2.33 trillion in the same quarter a year ago.

IndianOil is a diversified, integrated energy major with a presence in almost all the streams of oil, gas, petrochemicals and alternative energy sources.

Indian Railway Finance Corporation Ltd:

Unlike Indian Oil, IRFC faced correction on December 6th as the stock price ended at Rs 75.82 apiece, down marginally. This railway stock's market cap is over Rs 99,085 crore.

Despite the latest pullback, IRFC stock is among the best-performing shares in 2023 with an upside of at least 130.5% year-to-date on BSE. The stock was below Rs 33 levels at the start of January this year.

Last month, IRFC RFC shares turned ex-dividend on November 10th for an interim dividend of Rs 0.80 per share having a face value of Rs 10 each. During Q2FY24, the company posted a net profit of Rs 1,549.87 crore as against Rs 1,714.28 crore in Q2FY23 and Rs 1,556.57 crore in Q1FY24. Total revenue from operations stood at Rs 6,766.32 crore compared to Rs 5,809.80 crore in Q2FY23 and Rs 6,679.17 crore in Q1FY24.

Bagkar added, "Following a steep rally in August and September of this year, the price has seen a sideway move in the range of 65 to 80. An aggressive close over 80, supported by robust volume could instil fresh upside in the stock, propelling it to 100 level. A closing basis support exists at the 70-point mark."

IRFC was incorporated as a public limited company on 12th December 1986 by the Ministry of Railways, as a wholly Government-owned public financial institution to raise resources to meet the developmental needs of the Indian Railways.