Markets have climbed a lot recently and the Sensex is now trading at 34,000 points. When stock prices go higher dividend yields fall. Until a few months ago, one would get dividend yields of as much as 7 to 9 per cent on good quality stocks. Not anymore. At best your dividend yields may now range in the 2 to 5 per bracket in good stocks. However, dividends are tax free upto Rs 10 lakhs, which is a good postive. We are only recommending high quality stocks, though their dividend yields could be lower.
KCP Sugars is not only a good dividend yielding company, but, the shares also have the potential to rally from here.
The company last declared a dividend of 90 per cent on a face value of Re 1. The yield as the current market prices of Rs 35 is around 3%. However, that is not the only reason to be recommending the stock of KCP Sugars. There are numerous other reasons. The stock is a cheaply priced stock in terms of p/e multiples.
The company reported an EPS of Rs 2 for the quarter ending Sept 30, 2017. If it maintains the same momentum it can easily clock an EPS of Rs 8 in FY 2018-19. This means the stock is available at just around 4.5 times one year forward earnings.
It has a very small equity base of Rs 11.74 crores, which means any strong buying can lead to a big potential upside in the stock. Check stock quote of KCP Sugars here
Indian Oil is the country's largest oil marketing company. Indian Oil has declared a dividend of Rs 19 per share in 2017. The current market price of the stock is Rs 384 and based on this the dividend yield works to 4.95 per cent.
However, it is important to note that oil marketing companies tend to benefit from lower oil prices. Hence, to the extent crude oil prices lower, better would be the profitability and better would be the dividend payout.
Also, lower crude price also helps to keep prices of the shares elevated. If crude prices skyrocket the shares of Indian Oil could fall, which has happened in the last few weeks.
SJVN declared a dividend of 27.50 per cent last year and based on the same the current market price translates into a dividend yield of 7.21 per cent.
SJVN is a mini ratna, government owned company. It has commissioned several hydro power projects and has also established a solar power project.
Net profit for the year ending Sept 30, 2017 was placed at Rs 434.89 crores. It is likely that we will continue to see profitability at the company grow as new project get commissioned.
At the current market price of Rs 37, the stock is not a bad deal on the dividend yield front.
Hindustan Petroleum is available at a dividend yield of 7.23 per cent, based on last year's dividend. It is unlikely that the company will maintain the same dividend as it has also declared a bonus.
Also, crude oil prices have rallied, which is likely to impact profitability. However, we believe at the current market price of Rs 415, the company can give a dividend yield of close to 6 per cent. A good buy at the current levels. Check stock quote of Hindustan Petroleum here
Power Finance Corporation
This is another government owned company that is high on dividend yields. The company declared an equity dividend of 50% last year.
At the current share price the dividend yield works to 3.75%. Power Finance Corporation is a good company and like most of the stocks mentioned above, has a stable track record of paying dividend. The stock is also available at below book value.
However, the company has not performed well in the last quarter and question remains on whether the company is able to retain the same dividend.
A few things to note about dividend stocks
Dividend income is tax free in the hands of investors upto Rs 10 lakhs. So unlike interest, which has to be added to your total income, dividend income is tax free.
Of course, we need to mention that there is a tax of 10%, if your dividend income crosses Rs 10 lakhs.
This of course would be more applicable to owner promoters, who are the ones who may end-up earning more than Rs 10 lakhs as dividend income. Looking for dividend yields is a good way to boost your portfolio.
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