It is always a great idea to buy stocks that are not only debt free, but, also have solid cash flows. These stocks also tend to provide great dividends, but, since the prices are high for such stocks, their dividend yields may not always be the best. Take a look at a few stocks that are debt free and can be good investment bets.
Tata Sponge Iron
Tata Sponge Iron is a debt free company with a decent cash on its books. What makes the stock an interesting pick are a number of reasons. First, are the company's plans to raise capacity to 425,000 tonne per annum from 390,000 tonne per annum. This should augur well for the company in terms of generating further cash flow. The company is also planning to enter long steel products and this project is likely to be completed in the next few years. This is likely to further give a boost to profits, which has already jumped from Rs 21.20 crores for the period ending March 31, 2017 to Rs 30.56 crores in the period ending June 30, 2017.
Tata Sponge: Huge opportunities
Tata Sponge Iron has huge opportunities going forward especially on account of manufacturing facilities that are very close to high quality iron ore mines. The company also has an integrated power plant and also sells surplus power that is generated. For the quarter ending June 30, 2017, the company reported an EPS of Rs 19.85. Even if the company does an EPS of Rs 100 considering all the expansions plans by 2019-20, the stock is available at a p/e of just 8 time this EPS. The stock is not a bad bet at Rs 820, considering the low equity, free cash flow and huge cash on the books.
NMDC is another debt free company that is worthy of investment. The company is a government of India owned company that is into iron ore mining. NMDC is a cash rich company. The stock gives a dividend yield of as much as 7 per cent at the current market price. If you are looking to buy a virtually monopoly business, with a strong cash flow and debt free status, NMDC is a good bet. The shares of the company have recently dropped from levels of Rs 140 to Rs 122, but is back above levels of Rs 132. This also is one more reason why it good be a good pick. Iron prices are on the rise and this is good news for NMDC, which is the largest iron ore producer in the country. Check stock quote of NMDC here
Sun TV is the leading player of satellite television in the south and owns a range of "Sun TV" channels in different South Indian languages.
This is again a debt free company with a very high dividend payment.
Sun TV is likely to be one of the biggest beneficiaries of the digitization drive initiated by the government of India. The promoters have also been acquitted by the Supreme Court, which is another positive for the company.
A good buy
Recently, the shares surged as much as 10 per cent on a single day after reports that Tamil Nadu Arasu Cable TV Corporation had launched its digital system from September 1, 2017. This many believe could result in Rs 70-80 crore revenues per year can be gained from the digitisation exercise.
The company has a strong position in the south and dominates certain markets. We believe that the company can report an EPS of Rs 50 for 2017-18, which makes the stock a little expensive at the current market price of Rs 766.
If you get the stock at around the Rs 700 levels, it would be a good time to buy into the stock. Again, the promoters of the company have a very high holding in the stock. A good debt free company to own.
Coal India is not only a debt free company, but is also a cash rich company. The best part of investing in the company is that you get solid dividends.
In fact, the stock has recently fallen to 52-week lows of Rs 238 and at the current market price of Rs 273 the dividend yield itself is a healthy 6 per cent. Buy Coal India for the long term for good yields. We are assuming that the company will declare a dividend of at least Rs 20 per share in 2017-18. If that happens and you get the stock at the Rs 250 levels, your dividend yield would be 8 per cent. Remember, this is tax free dividend as well. However, we anticipate that the company would lower the dividends this year, due to falling coal prices.
The government's recent initiatives on "power for all" should also benefit the company in the long run.
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