Markets have rallied a great deal and the Sensex looks likely to hit the 39,000 points mark soon. This is despite the sharp fall in the rupee and rising crude prices. Here are a few stocks that individuals can buy for excellent dividends, despite the markets at higher levels.
Hindustan Petroleum has seen a sharp drop in its share price, as rising crude oil prices and falling rupee have made an impact.
The stock, which was once trading as high as Rs 490, has slumped to levels of Rs 257. At these levels, the shares are not a bad bet. Shares of HPCL, move in tandem with crude oil prices. It is important to note that crude has rallied quite a bit in the last few months and any further rally, could put pressure on prices. However, we believe at these prices, it is unlikely there will be sharp gains in the rates of crude.
The only worry is if crude prices rally further, the government may ask oil marketing companies to absorb some of the hike, to avoid burdening the consumers. This could be a major factor in net profits and hence dividends.
Now coming to the dividends, last year (FY 2017-18) the company declared a dividend of Rs 15.6. We believe that the company is likely to retain the same dividends (unless government intervenes), as profits have been reasonable. If that happens, we could see dividend yields of 6.5 per cent for 2018-19.
Dividends it maybe noted are tax free in the hands of investors up to a sum of Rs 10 lakhs.
Indian Oil, like Hindustan Petroleum is an oil marketing company, whose fortunes are linked to movement in crude prices.
While petrol prices are largely regulated by the government, as mentioned earlier, if there is a government intervention, it could be disastrous for oil marketing companies.
Now, for 2017-18, Indian Oil declared a divided of Rs 20 per share. However, that was before the issue of bonus shares. Now, we have to assume that with the issue of bonus shares this would stand reduced to Rs 10 per share. This means that the dividend yield on a share price of Rs 155, would work to 6.45 per cent.
Again, one has to assume that there would be no government intervention in any form, particularly in asking oil marketing companies to absorb the hike in rude oil prices. This is a major risk for these two stocks.
Check stock quote of Indian Oil here
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