If you are new to investing you do not want to begin the investing journey with high risk high beta stocks, that can result in losses. There have been many beginners to stock investing in India, who have invested money and never recovered that money. Once the disappointment sets in, you do not want to ever invest again. So, a good idea would be to stay focussed on quality stocks, which are not very high beta and have sound fundamentals.
Beginners to investing must look at safe haven stocks. Here are a few that can offer you good dividends and excellent protection.
Hindustan Zinc is the leading player of zinc, lead and silver. The company has a solid track record of declaring dividends. Last year the company declared a dividend of Rs 20 per share, taking the dividend yield to 9.24 per cent.
The company ranks as the 2nd largest producer of lead and zinc across the globe. the company is looking to ramp-up production in both lead and zinc, which should reflect in the financials in the years to come.
This is also a company that is cash rich and is debt free. Apart from this, the dividend yield itself makes for a good bet.
Hindustan Zinc: Rising zinc prices may favour
Zinc prices are set to rise to at least $2600 per tonne. In the period Jan to June, zinc production has declined by near 1 per cent, while the demand for the product has increased. The steel production outlook from China looks very robust, which should drive zinc prices even higher in the coming days.
There have also been smelter outages from Russia and US, which will add to supply constraints. All this is expected to benefit a company like Hindustan Zinc.
For the quarter ending June 30, 2019, Hindustan Zinc reported a decent set of results. The net profits came in at Rs 1,765 crores. The EPS of the company was placed at Rs 4.18. Even if the company does an EPS of Rs 18 for FY 2019-20 and we apply a conservative p/e of 15 times, the stock should trade at Rs 270. Buy the shares for long term gains.
Jagran Prakashan is a leader in most of the businesses it operates. The company's "Dainik Jagran" is India's No 1 daily, Mid Day is the No 1 read evening daily newspaper in Mumbai and Radio City is the leading player in a host of markets including Bengaluru.
In fact, the print digital business has also been growing rapidly.
The radio business under Music Broadcast has been doing very well and margins have expanded a great deal. This along with the digital business would continue to drive growth at the company. In fact, Music Broadcast saw a substantial improvement in EBITDA margins in the quarter ending March 31, 2019, as compared to the previous quarter of last year.
Why to buy the shares of Jagran Prakashan?
Jagran Prakashan is the leading player in most of the verticals. As elections to crucial states gather momentum, we see higher revenues from advertisement spent, given that "Dainik Jagran" is the No 1 newspaper in the country.
The company performed reasonably well for the quarter ending March 31, 2019, even at a time when newsprint costs continued to be high.
Even if the company does an EPS of Rs 10 by 2019-20, the stock should command a p/e of 20 times at least, given its leadership status.
The stock has the potential to move to Rs 200 from the current levels. One must also remember that the company has always been rewarding its shareholders with buyback at higher prices and decent dividend yields. Buy the stock for long term investment.
Also, the quarterly results for the period ending June 30, 2019 could be good, given the fact that there could be good advertisement revenues from elections that are currently being held.
NLC is a company that is engaged in power generation.
The government owned NLC India is the only government owned company to have announced a buyback of shares at a price of Rs 88.
The current market price of Rs 66 is good for many reasons. The first and foremost is that it is not very far from its 52-week low. The second is at this price the company's dividend yield itself works to around 6 per cent, which is not bad at all. Dividends are tax free upto Rs 10 lakhs per year.
The company is a cash rich company, which is why it has engaged in a buyback of shares. The dividends being offered means that the shares are unlikely to go low and hence there is some protection.
Recently, Coal India has entered into a pact with NLC India to set up a joint venture for power generation.
At Rs 66, the stock is available at a 1-year forward p/e of just 5 times, which makes the shares very attractive. The stock has very limited downside risk from current levels, which makes the same attractive buy for beginners to investing.
Shares of HeroMotor Corp have come crashing down from levels of Rs 3,500 to the current levels of Rs 2,500.
In fact, most of the auto stocks have fallen considerably in the last few weeks, on account of slowing momentum. However, it is important to note that following the election outcome, and a stable government we might see demand pick-up once again.
In fact, Hero Motor Corp could be one of the beneficiaries of several schemes launched by the Government to boot rural income. The company has a substantial rural market and is one of the largest two wheeler players in the world. The dividend yield of the company is also attractive at around 3.5 per cent.
Yes Bank reported quarterly numbers that surprised market analysts. The bank reported a quarterly loss of Rs 1,507 crores, thanks to provisions jumping.
Analysts were quick to downgrade the stock, with the shares plummeting to Rs 95. In fact, the shares have now dipped to Rs 97 from levels of Rs 404 hit in Aug 2018.
The new CEO of the bank has been determined to adopt a prudent an conservative approach, which is reflected in the results. He also seems busy cleaning-up the mess, which should create long-term value for shareholders.
The bank is likely to have a few bad quarters. However, by 2020-21, Yes Bank could report an EPS of Rs 10, which makes the stock inexpensive at the current price of Rs 94.
A good share to buy for beginners, keeping a long-term perspective in mind.
How shares are taxed?
Beginners to investing in shares should now understand the tax implications especially after the Union Budget.
There is a long term capital gains on tax that is applicable if you now sell shares after 1 year. The Union Budget 2018 had once again introduced this tax. Now, if you make a profit of more than Rs 1 lakh, you need to pay 10 per cent as capital gains tax. Short term capital gains tax on shares would continue to stay at levels of 15 per cent.
Beginners to investing should note these changes before investing.
The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author owns shares in Coal India and Jagran Prakashan.