Markets are trading very close to peak levels and hence it is advisable to look for stocks that are attractive from a dividend yield perspective, and have been beaten down and close to 52-week lows and have reasonable growth prospects.
Here are a few such stocks that have the potential to rally in the coming days.
The downside risk to the Coal India stock from here is very limited, given that at this price the stock becomes attractive for its dividend yield. At the current market price the dividend yield based on last year's dividend is in excess of 7.5 per cent.
For the quarter ending Dec 31, 2019, Coal India reported a solid financial performance. The company reported an EPS of Rs 6.37, as against an EPS of Rs 5.72 in the previous quarter ending Sept 2019. The company for the month of Jan 2020 has also reported an increase in Coal production by 10.2 per cent, as compared to the period of Jan 2019.
There is a likelihood that the performance for the quarter ending March 31, 2020, could be significantly better along with a solid dividend yield in the month of March.
The Coal India stock is trading at a p/e of just 8-9 times one year forward earnings, making the stock a good pick at the current levels. The stock has also hit a new 52-week low of Rs 171.75.
Oil India is another stock that is attractive for its dividend yield. The company has declared a dividend of Rs 9 per share and is currently available on cum dividend basis. The dividend yield on the stock is close to 8 per cent, which makes it rather a good stock to hold, for those looking at dividends.
The company saw its net profits for the quarter ending Dec 31, 2019 decline, thanks to falling crude prices. However, we remain optimistic that crude prices over the next few quarters could rise, given that the scare over the Coronavirus would gradually diminish.
CLSA retained a buy call on the stock, and cut its price target to Rs 195 (from Rs 225 earlier) after profit missed estimates. However, given that the stock is trading at just Rs 130 on a cum-dividend basis, makes the stock very attractive.
Also, there are hopes that there could be a rise in production of both oil and gas in the coming quarters, which augurs well for the company.
The stock has fallen significantly from the higher levels of Rs 150-160 thus representing a good opportunity to invest on declines.
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About the author
Sunil Fernandes has spent 25 years covering business and finance. He has worked with leading dailies like Deccan Herald, Hindustan Times and Gulf Times. Apart from this, he has also worked with business and investment magazines like Dalal Street Investment Journal and Oman Economic Review.