The stock of BPCL has two major triggers, the first is divestment and the second is the dividend payout that is likely to happen in the next few months. Let us understand these two reasons separately before we see what brokerages are saying on the stock of BPCL.
BPCL, dividend of Rs 58 per share
The stock of BPCL is available at a dividend of Rs 58 per share, which was a record dividend declared by the board of directors. Let's assume that you buy the share of BPCL at the current market price of Rs 445, and hold the shares maybe until Sept, to receive the dividends. Your cost of acquisition becomes only Rs 387.
Now, the dividend yield thus jumps, but the company is unlikely to declare the same dividend next year. So, if you are buying the stock for a regular dividends every year, just forget it, the same is not going to happen.
What we are trying to tell you here is that it reduces your cost of buying the shares to Rs 387, which is a good bet to buy the stock of BPCL. We are not sure when the dividend will be credited, but, the possibility could be later in the month of Sept.
Divestment - the next big trigger for the stock
The divestment talk in BPCL, whereby the government plans to sell its entire stake in the company has been on for sometime now. However, it is possible that it could happen before March of next year.
According to reports the government was trying to conclude the planned big-ticket disinvestments, including privatisation of fuel retailer-cum-refiner BPCL and despite Covid-induced constraints, department of investment and public asset management (Dipam) secretary Tuhin Kanta Pandey, said recently.
Now, given the strain the government is facing with the fiscal deficit, it is highly possible that we would see the conclusion of divestment, which could be another reason to buy the stock of BPCL.
Brokerages initiate buy on the stock of BPCL
Two top brokerages, ICICI Direct and Motilal Oswal had initiated a buy coverage on the stock in their reports on BPCL.
"BPCL posted better-than-estimated profitability, driven by better marketing volumes and refining/marketing margin, further aided by inventory gains. The company made huge progress towards privatization in FY21, despite challenges posed by COVID-19, by streamlining its subsidiaries (divested its entire stake in Numaigarh Refinery, consolidated its stake in Bharat Oman Refineries, merged BGRL with BPCL) and sold off its trust shares," brokerage firm Motilal Oswal said in a report.
At the moment, the shares have BPCL have gone nowhere, thanks to rising crude prices. There has been no momentum in the stock at all over the last few weeks. However, BPCL share price has now slumped to Rs 445, which make it a great stock to pick for the divestment and dividends trigger.
Investing in stocks poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. Investors should take care because the markets are near record highs.