Buying into stocks with the index at 32,000 points is not for the fainthearted. This is because if the markets collapse there could be severe damage and capital erosion. However, there are some stocks that could fetch value even at these levels, purely because the downside risk is limited on account of dividend yields and nature of business. Here are some stocks.
Coal India is a stock that is quoted at Rs 248 and is very close to its 52-week low of Rs 242. This is a stock that we like for a number of reasons. The first is the dividend yield. Now, last year in 2016 the company declared a dividend of Rs 27 per share. In 2017, the company has already declared dividends of close to Rs 20. Now, let us assume that in the future as well, because the performance is not going to be too great the company sticks to Rs 20. If you buy, you get a dividend yield of slightly more than 8 per cent at the current market price of Rs 248. This is tax free and more than what banks in the country offer, which is why the stock of Coal India is a good pick.
Few business risks
Coal India at the moment faces very few business risks as there is an assured demand for coal. The only risk is the labour problems, but that has been laid to rest. In the past there have been strikes, but, in the last few years by and large things have been peaceful. It is highly possible that in the coming days, we will see the company declaring higher dividends, given that in the past there has always been pressure on the company to declare higher dividends. The stock is a pretty decent bet at the current levels.
Indian Oil is an excellent play on lower crude prices. It is the country's largest oil has the best retail network. Recently, the company declared good quarterly numbers for year ending March 31, 2017. This is again also a good play on dividend yields. The company has already declared a dividend of Rs 18 per share this year. Apart from this the Paradip Refinery which has gone on stream, will contribute to higher gross refining margins because of its complexity. Indian Oil can easily report an EPS of 34 by 2018-19, which means the stock is available at a price to earnings of just about 11 times. A good stock to buy for the long term.
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