Coal India is a cash rich debt free company, and one of the world's largest explorer of coal mining. At a level of Rs 170, the stock of Coal India becomes extremely attractive and here are some of the reasons for the same:
Attractive on dividend yield
The board of directors of Coal India are slated to meet on March 6 to consider interim dividend. At the current market price of Rs 170, the dividend yield on the stock is almost 8 per cent, based on last year's dividend of Rs 13.1 per share. This is much better than bank fixed deposit interest rates.
The company has not declared a dividend since March of last year, so we do expect a dividend near that Rs 13.1 per share mark, which should take your dividend yields to near the 8 per cent mark. It's also important to remember that dividend up to Rs 10 lakhs are tax free in the hands of investors only until March 31, 2020.
Demand led growth likely
It is highly possible that there could be a strong demand led growth. A recent report suggested that cola demand could be 5 per cent for Coal India until 2030. For the quarter ending Dec 31, 2019, Coal India's net profit fell 14.1 percent to Rs 3,921.8 crore as against Rs 4,566.8 crore in the year-ago period. However, the performance was adversely impacted due to unseasonal rains. Demand led growth for thermal power generation would continue to drive the performance of the company going forward.
In fact, production has improved significantly in the month of Jan, which should reflect in the quarter ending March 31, 2020.
Near 52-week low price
At around the Rs 170 levels mark, the stock of Coal India remains attractively priced at less than 10 times, one year forward earnings. This is much cheaper than most global peers. There are hopes that the stock would continue to rise, on account of the dividend yields that they offer.