Buy This Tata Group Stock For A Dividend Yield Of 4.65%, Company Is Repaying Debt

Tata Steel: Good dividend yields

For the year ending March 2022 Tata Steel has declared an equity dividend of 510.00% amounting to Rs 51 per share. Now, the share has been split to Re 1 per share, so if the company continues to maintain the same dividend next year, it would be Rs 5.1 per share, which takes the dividend yield to 4.65% on a face value of Re 1 per share.

Decent financial performance, despite falling steel prices

Tata Steel reported consolidated EBITDA of Rs 15,047 crores for the quarter ending June 30, 2022. On QoQ basis, EBITDA margin improved to 24% while EBITDA per ton increased by Rs 3,780 to Rs 22,717. The Consolidated Profit after tax stood at Rs.7,714 crores.

Encouraging fall in net debt over the years

The volatility in commodity prices and immediate impact of the export duty in India have led to an increase in working capital but our cost improvement and other initiatives along with expected pickup in demand in the second half of the year should result in normalisation of working capital. In spite of significant working capital pressures, the Net debt stood at Rs 54,504 crores and Tata Steel's financial metrics continue to remain strong with Net debt to EBITDA <1.0x.

"We remain committed to our annual deleveraging target of $1 billion in line with our capital allocation strategy to reduce our debt," Koushik Chatterjee, Executive Director and Chief Financial Officer of Tata Steel said recently.

Steel prices see a decline

While steel prices decline may impact the company, it is important to note that coking coal prices too have declined. Global steel prices have moderated in the April - June period on slowdown in global growth and regulation. Coking coal prices have declined by around 40% from $530/t levels in April to around $300/t by end June, but continue to remain volatile. So, margins could sustain if coking coal prices continue to see a decline.

How the stock of Tata Steel has performed?

The shares of the company split recently to Re 1. Based on this face value, the stock hit a 52-week low of Rs 82 and has seen a high of Rs 153. The shares are currently trading at Rs 109 and significantly away from its 52-week high. Should steel prices move higher, we might see solid traction in the shares of Tata Steel going ahead. Currently, there are fears of an economic slowdown on the back of rising interest rates across the globe.

Disclaimer

Please note that investing in shares is risky and Greynium Infomation Technologies Pvt Ltd and the author cannot be held responsible for losses based on a decision taken after reading this article. Investing in equities is risky and investors should exercise caution before investing in the markets. In the last few weeks, the markets too have run-up sharply.