Small Cap Stock With A Dividend Yield Of 9.73% & Debt Free Status: Should You Buy?

Balmer Lawrie Investments is a government of India owned enterprise. The company tends to declare robust dividend year-on-year and has done do for the last few years.

Dividend yield of 9.73% at Balmer Lawrie Investments

In FY 2019, the company declared a dividend of Rs 34 per share, in FY 2020 a dividend of Rs 37.5 per share and in FY 2021, the company declared a dividend of Rs 38 per share. If you take the current market price of Rs 390, the dividend yield works to 9.73%.

Now, there are a few things that investors should know, before going by the sheer dividend yield. The Company does not carry on any business except to hold 105679350 equity shares of Rs.10 each of Balmer Lawrie & Co. Ltd.

All of the income that the company receives is mostly the dividend income that it receives from Balmer Lawrie.

Business likely to wind-up on divestment in Balmer Lawrie and Company

Business is likely to wind-up on divestment of shares by the Government of India in Balmer Lawrie and Company. What happens in that case to the shares of Balmer Lawrie Investments is not understood. Would shareholders lose money in case of Divestment is difficult to say.

"The Company shall divest its shareholding and wind up its business on completion of disinvestment of shares of Balmer Lawrie & Co. Ltd," the website mentions.

Should you buy the stock?

In view of the above, we would advise investors to stay away, though we believe that full divestment is unlikely by the Government of India in Balmer Lawrie and Co. The stock is also listed on the BSE only. The price to book value, the p/e ratio are all good, but, then it is just a holding company, which receives only dividend income. We are also very unsure what would happen to the company, when Balmer Lawrie and Company divestment takes place.

Disclaimer

Investing in equities is risky and investors must therefore understand the risk. The author and Greynium Information Technologies Pvt Ltd would not be responsible for any losses caused based on the article. The author and is family do not hold shares in the above company.