Interest rates have crashed over the last few quarters. At best a government bank may offer you an interest rate of 5.5 per cent, no matter which tenure it is for. The other best option to get decent yields, is to look for dividend paying stocks, though at the moment dividends are also taxable in the hands of investors. The one thing we want to inform our readers is that there is no way we can predict the future dividends. However, we can assure our readers that the companies mentioned below would declare a dividend for sure. How much and what the dividend yields would be, is at best a guess.
Power Finance Corporation (PFC)
This is a government owned entity and is also the largest player in the power finance business. Last year, PFC declared a dividend of Rs 9.5 per share. Based on this dividend, the dividend yield translates to 10.13 per cent.
Even if the corporation, declares a slightly lower dividend of Rs 7 to 8 per share, your dividend yield can still be more than 8 per cent for 2020-21. The company had a very decent performance for the first quarter ending June 30, 2020, wherein the company reported a 23 per cent rise in consolidated net profit at Rs 3,557.23 crore during the quarter ended June 30, helped by a rise in income. This leaves us with reason to believe that the dividend for FY 2020-21 would not be cut sharply.
This is another company that is largely engaged in financing power projects, particularly rural electrification in the country.
For the year ending March 2020, the company declared an equity dividend of 110.00% amounting to Rs 11 per share. At the current share price of Rs 107.15 this results in a dividend yield of 10.26 per cent.
Again, we do not expect too much of a drop in the dividends for the company, which should definitely result in dividend yields that beat interest rates from fixed deposits. Both these companies tend to declare dividends in the month of February, so one needs to wait for a few months until dividends are declared. Even fundamentally the stock is available at a price to earnings ration of just 4 times and a price to book of 0.49 times.
Coal India has seen coal disruptions thanks to the Covid-19 situation. Hence, we do not expect the company to declare the same dividends as last year. In fact, we expect the company to cut dividends For the year ending March 2020 Coal India has declared an equity dividend of 120.00% amounting to Rs 12 per share. At the current share price of Rs 123.20 it results in a dividend yield of 9.8 per cent.
Even we assume a dividend cut and the dividend is around Rs 8 per share, the dividend yield should still be in the viscinity of 6 per cent. However, we would still prefer PFC and REC for their dividend yields, rather than Coal India.
Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor.