Tech Stock To Buy To Receive 300% Special Dividend & 300% Final Dividend

Tech Mahindra declares 300% Special Dividend & 300% Final Dividend

The Board of Directors of Tech Mahindra have recommended a final dividend of Rs. 15 per share and a special dividend of Rs 15 per share on par value of Rs 5. This takes the dividend to a solid 600% for the financial year ending March, 2022. The Final dividend, if approved, at the AGM will be paid by 9 August, 2022. This dividend is in addition to Special Dividend of Rs.15/- per share paid as interim dividend in November 2021. The total dividend for FY 2021-22 will be Rs. 45 per share on par value of Rs 5 (900%). The shares of Tech Mahindra become attractive for their dividend yield.

Should you buy the stock of Tech Mahindra now?

Consider this, the stock of Tech Mahindra has dropped a whopping 38% from 52-week highs. Almost all of the tech stocks have fallen sharply over the last few months. One of the reasons for the fall in tech stocks are worries over growth in the United States, a very key market. Investors are worried that as interest rates move higher, economic growth in the US would slow, which could act as a dampener on IT spends. This has impacted stocks of IT companies in India. However, many brokerages remain upbeat on select stocks in the light of fallen prices.

Should you buy the stock of Tech Mahindra?

In our own analysis we believe that the stock of Tech Mahindra is trading at 20 times price to earnings multiples, which neither cheap not expensive. Therefore, the stock becomes attractive only if there is a further fall in its price. Yes, to some extent the dividends would reduce the cost of acquiring the stock. Recently, Anand Rathi had a buy call on the stock of Tech Mahindra. According to the firm, the company continues to get positive demand across sectors, however it is facing higher employee attrition and margin pressure due to higher expenses. Anand Rathi maintains buy rating on the stock with a revised target price of 1650 per share. The shares of Tech Mahindra were last seen trading at Rs 1125 on the NSE.

Market movement crucial for the Tech Mahindra stock

Should the markets dip, IT stocks like Tech Mahindra would fall in tandem. "Market is stuck in a broader range for last one month, which is expected to continue until any clear direction emerges on either side. While declines are bought into - support is missing at higher levels. For now the market direction appears weak with lack of any positive triggers both on the global and domestic front. Although Nifty managed to close above its crucial support levels of 16,400 - it touched an intraday low of 16347 indicating pressure in the index and any close below this can lead to further downside in the near term. The commentary of RBI on Wednesday over various economic factors would provide further cues for the market," says Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.