Highest PSU Dividend Yield Stock Trading Below Rs 250 Is Top Pick Of September; 10% Upside Seen

Coal India, is the largest government-owned coal producer in the world. This central PSU is listed on both exchanges BSE and NSE and is recommended as a hot stock to buy for September month. The stock is currently trading below Rs 250 and is expected to record up to 10% upside ahead. Last week, the stock gained nearly 4% on BSE. Coal India is also the third highest dividend yield stock in the last 12 months after Vedanta and Hindustan Zinc in the large-cap basket but is the highest among PSU dividend yield stocks.

Religare Broking has selected Coal India as the pick of September month. The brokerage has given a target price of Rs 260 for Coal India, with a stop loss of Rs 223 and risk-reward in the ratio of 1:2.

In its rationale, the brokerage highlighted the following key points:

- The stock has gained only a per cent but with a substantial rise in OI nearly 23%.

- 92% of Open Positions rolled to the next series (~92% on last expiry).

- OI of 15k contracts as against 12k previously with decent delivery in cash.

- With Possibly Long addition & Carry forward of these bets; Stock may move higher.

In its technical view, Religare said, "Coal India has been trading in a consolidation range i.e. 230-235 for the last ten months, after a strong directional move." Further, it highlighted that the stock attempted a breakout in June 2023 but failed and retraced to the support zone of the medium
term moving average i.e. 100 EMA.

"Formed a higher base in the last three months and currently trading on the verge of a breakout again," it added.

Last week, on Friday, Coal India shares ended at Rs 236.85 apiece, soared by 2.93% on BSE. Its market ap stood at nearly Rs 1.46 lakh crore.

In the trading week that ended on September 1, 2023, Coal India stock gained by Rs 8.85 or 3.88% overall on the exchange.

On Friday, Coal India announced that sustaining its production pace, Coal India Limited (CIL) produced 52.3 million tonnes (MTs) of coal in August 2023 registering a strong 13.2% over 46.2 MTs of August 2022. Comparative production for the month surged ahead by 6.1 MTs.

Further, Coal India stayed on course with an annual asking growth of 11%, till August FY 2024, the state-owned coal miner produced 281.5 MTs posting 11.1% year-on-year growth. The
volume expansion in production was 28.2 MTs during the first five months of FY 2024 compared to 253.3 MTs during the same period in FY 2023.

Also, total coal supplies to all-consuming sectors shot up to 59 MTs in August 2023 reflecting a strong double-digit growth of 15.3% compared to 51.2 MTs in the same month last fiscal. Supplies were up nearly 8 MTs in a single month.

From April to August of FY24, the company's total coal off-take rose to 305.5 MTs with around 8% growth with a 22.4 MT gain over the same period last year, when the off-take was 283.1
MTs.

According to Axis Securities' latest report, in the large-cap basket, Coal India holds the third spot of top dividend yield companies with a dividend yield of 9%. In the last 12 months, Coal India paid a dividend of Rs 20.25 per share to its shareholders. In the public sector undertakings (PSUs), Coal India is the highest dividend yield company followed by ONGC, Chennai Petroleum Corporation, and REC Ltd.