With the markets at historic peak, it's always a good idea to stay a little defensive. This means you avoid stocks in the high beta segment like metals and banks, and look for stocks, whose downward risks are limited in the event of a sudden trend reversal in the markets. Here are a few stocks you could hide into.
Coal India is a good defensive bet largely because of its dividend yield. Based on last divided declared the dividend yield for the coal mining company is 7.60 per cent.
Dividends as we all know are tax free, upto a sum of Rs 10 lakhs.
This will ensure that the stock does not fall too much from the current levels, since the dividend yields are even better than bank deposits.
Now, there are one or two interesting things that could propel the stock of Coal India higher. First is that during the quarter ended June 30, 2018, the coal off take was 12 up per cent. This is way higher than what analysts were expecting and well above the averages that the company churns out. The wage revision is also behind and if realizations improve profitability could soar. This means valuations could improve and so could the dividends declared by the company.
Coal India is a cash rich, debt free company, whose business prospects are very much ensured, due to the coal mining leases. Also, it is a government owned company.
Coal India shares are currently trading at Rs 262, the stock is not a bad bet and is a good defensive stock, in a rising market.
This is another good defensive bet in a rising market. NMDC is yet another government owned company, but, is into the mining of iron ore. What is attractive about the stock is that the shares are near 52-week lows. The dividend yield is not as great as Coal India, but, is around that 5 per cent market.
Again, this is a cash rich, dividend paying debt free company. Iron ore prices are likely to stay elevated, though we have seen some blip recently. This is a government owned company, with plenty of lease for iron ore and could be well protected, in terms of government policies.
For 2017-18, the company reported an EPS of Rs 12, which means the shares is barely trading at 9 times, trailing EPS. In terms of price to book, the stock is available at barely 1.25 times. A good defensive bet in times of markets trading at a peak. Investors would do well to buy the stock for good regular dividends.