Shares in select oil and gas stocks have fallen sharply in the last few days, and several of them have fallen to 52-week lows or near 52-week lows.
The oil and exploration companies Oil and ONGC, both dropped to 52-week lows on Monday, as crude oil prices have plunged (they have recovered marginally on Tuesday). On the other hand select refinery and oil marketing companies, who tend to benefit with a drop in crude prices have also fallen to 52-week lows like Indian Oil.
In fact, most of the government owned companies like Coal India too dropped to a new 52-week low, immediately after the Union Budget.
Solid on dividend yields
Most of these companies are simply good on dividend yields. Take the example of Oil India. The dividends here are in the range of 6 to 7 per cent (based on last year's dividends) and this financial year, dividends are still tax free up to Rs 10 lakhs. However, next year dividends will be taxed in the hands of investors.
ONGC, based on last year's dividends, is available at a dividend yield of near 6 per cent. The stock is available at a price to earnings ratio of just 5 times, one-year forward earnings.
The stock recently plunged to a 11-year low of Rs 102.90. Most analysts are bullish on the stock and see an upside potential from the current levels, because of its low valuations, when compared to even global oil and gas majors.
Even some of the oil marketing companies look good and may see enhanced quarterly performance in the next few quarters. Again like Oil India and ONGC, Indian Oil is also available at a very good dividend yield of nearly 8.33 per cent. The company may declare dividends sometime in Feb and March this year.
Fundamentally, there is nothing wrong with some of these companies. They are solid in terms of profitability, low on valuations and excellent in terms of dividend yields.