MNC Stock To Buy From The IT Space With Dividend Yield Of 5.6% & Solid Growth

Oracle Financial Services: Business seeing good momentum

Oracle Financial Services is a company that is majority owned by Oracle Corporation, which is among the top IT companies in the world. The company caters to software services in the banking industry, including corporate banking, retail banking, insurance industry etc.

The company has been a consistent performer in terms of its earnings and the business is expected to grow even further. The Company signed license deals of $15.6 million during the quarter ending Dec 31, 2021 with customers in 31 countries. For the nine month period, the signings are up almost 21%.

Cheap on the valuations from front

The company for the nine-month period ending Dec 31, 2021 reported a net profit of Rs 12,71 crores, translating into an EPS of Rs 147.55. We believe that the company will do an EPS of around Rs 200 for FY 2021-22 and about Rs 220 for FY 2022-23.

The stock at a price of Rs 3480 is currently trading at a p/e of just 15 times 2022-23 earnings. All stocks from the IT space have moved up dramatically in the last few quarters. In fact, even the smaller and medium IT stocks are available at p/e multiples of 25 to 30 times. If you accord a p/e of even 20 times to the company based on an EPS of Rs 220, the stock should trade at Rs 4400 as against the current market price of Rs 3480.

Good on the dividend yield front

Oracle Financial Services has been paying consistent dividend over the last few years. In fact, for FY 2021-22, the company declared a dividend of Rs 200 per share. If we assume that the company retains the same dividend for 2021-22, the yield for the stock on the current market price of Rs 3480 translates to 5.76%. The dividend yield on the stock itself is better than bank deposit interest rates. We believe that this is a MNC stock that is in the fast growing IT services space and hence deserves a re-look for investment purposes. Buy the stock of Oracle Financial Services for the long-term.

The only problem that we see right now is the volatility in the markets overall. There are just two many issues including geo-political tensions as well as rising interest rates in the US. However, one must stick to quality stocks, with a good track record of payment of dividends. We would recommend that you buy into small quantities and average your cost on declines.

Disclaimer

Please note, investing in equities is risky. Neither the author, nor the brokerage firm nor Greynium Information Technologies would be responsible for any losses based on the above article. Markets now are highly volatile due to geo-political tensions and rising interest rates in the US. Therefore, caution is warranted at this stage. The author currently owns shares of Oracle Financial Services