Several bluechip stocks have fallen 25-30 per cent in the last few weeks, after worries that demonetization would curb demand. Stocks that are consumer oriented have seen shares fall sharply. Take the case of companies like Jubilant Foodworks (franchisee for Domino's Pizza) or something like an Asian Paints. All of these have seen sharp fall in their prices, sometimes the decline has been as severe as 30 per cent. Here are a few stocks that can generate wealth for investors in 2017 and have seen prices drop sharply.
Shares of Coal India have slumped to Rs 287, from levels of Rs 310 just a couple of weeks ago. The reason for the fall were the pathetic numbers that the company reported for the quarter ending Sept 30, 2016. This led to a sharp fall in the share price of the company. However, this is a cash rich company that has very little or no competition. In fact, it generates tonnes of Coal and along with it tonnes of cash. This is why the company pays a solid dividend to shareholders because of the solid cash flow and monopoly kind of business.
A great dividend yield
Coal India is a stock that has always been a play on its dividend, which should be declared somewhere in Feb, 2017. Last year the company declared a dividend of Rs 27.4 per share, which translates into a dividend yield of 9.51 per cent. Even if we say the company declares a dividend of Rs 20 per share, due to the bad quarterly results, the yield will still come to around 7-8 per cent. This is not bad and is tax free as well. It is unlikely that the share price would dip too much considering the solid dividend that the company pays. Demonetization or no demonetization, the stock is a great one to buy at the current levels, purely for the dividend yield.
This is another stock that generates a decent dividend yield and also a good play on the banking sector. The bank last year declared a dividend of Rs 5 per share and at a price of Rs 108, the stocks gives a dividend yield of 4.6 per cent. However, one is not sure if the bank will declare the same dividend as last year. Now the caveat. The quarterly numbers for the banking sector is expected to be dismal given the de-monetization effect. In fact, post de-monetization retail loans have taken a hit and it is unlikely that we will see any improvement at least in the next two quarters or so. So, be prepared to wait for some more time and we suggest buying the stock somewhere in Jan, after the numbers are declared.
The wait maybe slightly longer
In any case, what we like about Karnataka Bank are the solid fundamentals. For example, the bank had a good control over non performing assets. For the quarter ending Sept 30, 2016, the NPAs dipped to Rs 3.64 from 3.92 in the previous quarter. The EPS for the quarter of Rs 6.51 means, the bank can report an EPS of Rs 25 for the full year. This makes the stock quite cheap at a p/e of just about 5 times. Not bad to buy the bank from a long term perspective.
This is another stock that is capable of generating superb dividend yields for investors. The company keeps declaring a dividend at least 4 times every year. In 2016, it declared dividends 4 times and in 2015 as well the company declared a dividend of 4 times. The dividend yield on the stock itself works out to 8.6 per cent.
A very small equity
The company has a very small equity capital of Rs 84 crores. For the quarter ending Sept 2016, the company reported a net profit of Rs 641 crores on this small capital. The company can report an EPS of Rs 60 for FY 2016-17, which translates into a p/e of just 10 times at the current market price of Rs 639. But the stock, since we believe that the housing sector in India is under penetrated and the company is an aggressive player in the segment. The dividend yield of the stock itself makes it a good attractive bet.
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 and his family do not own any shares in the above mentioned stocks.