A friend who doesn’t meet regularly but goes on vacation with you is even more important.
But a friend who visits you regularly, joins you on vacation, and pays some of your bills is a pure blessing!
We rarely get such friends, don’t we?
Now think about the above example in terms of investing in stock market,
A stock that is fundamentally strong is an obvious choice.
A stock that consistently pays regular dividends and has proven to be a hedge against inflation is even more important in the current environment.
Now combine the two and your investment case becomes simple. On top of this, the stock is available cheaply due to the recent correction.
With the help of Equitymaster’s powerful stock screenerWe’ve got five stocks that are frequent dividend payers And look fundamentally strong.
These stocks are also available at cheap prices.
Read on to know which 5 stocks fit this criterion…
#1 Indian Hotel Company
When we talk about hotels in India, it is impossible not to mention the name of Indian Hotel Company (IHCL). Taj, Vivanta, Ginger, all these prestigious, elegant hotels, are owned by IHCL.
A huge old fruit tree with deep roots will stand up against all kinds of weather. It may drop leaves and lose fruit in difficult times, but it will never drop.
IHCL is exactly like this tree. 2022 brought the market down from its high. Many companies had to bear the brunt of the global recession. But amid all this, the share price of IHCL remained high.
The declining trend in the share price of IHCL has been an upward trend in the market. This year it has increased by 25 percent.
Of course, Covid-19 had taken a toll on the hotel business. IHCL is reporting losses for FY 2021 and 2022.
2021 and 2022 were extraordinary years. So the performance in these two years doesn’t really reflect the position of a company.
However, the situation is changing after Kovid-19. In fact, for the fourth quarter of 2022, IHCL reported quarterly profit 715.7m, which is about 173% more than the previous year.
When it comes to rewarding its shareholders, IHCL has always mastered the game. IHCL has paid dividends continuously to its shareholders with the exception of a few years since its inception.
IHCL managed to reward its shareholders even during heavy losses and tough times.
#2 Oil India
A general stigma exists around public sector units (PSUs). PSUs are believed to be poor performing units of the government that spend more money than they earn.
However, this is not true for all PSUs. Some PSUs have performed very well. In fact, these PSUs have exceeded the stock market expectations.
One such PSU is Oil India. Oil India, a Navratna PSU, is the second largest Indian-government-owned hydrocarbon explorer and producer. It is owned by the Ministry of Petroleum and Natural Gas.
Oil India has witnessed steady growth in sales and profits over the years. It is a shining star for the government in the basket of PSUs.
One of the best things for investors while investing in PSUs is consistent dividends. PSUs are compulsorily required to pay dividend.
Hence the investors of Oil India have been enjoying continuous dividend payout since 2010. In fact, the company has often paid interim dividends as well.
For 2022, it has already paid two interim dividends 3.5 and 5.75 while the final dividend is yet to be declared.
The share price of Oil India is facing the downfall of the market in 2022. On YTD basis, the share price of Oil India has increased by 42%. This is a strong figure, especially when compared to the volatility of the markets in 2022.
Oil India is trading at a Profit to Book (PB) ratio of 0.94. If the PB ratio is less than 1, the stock is generally considered undervalued.
#3 VLS Finance
VLS Finance is a reputed name in the finance industry. Established in 1986, VLS Finance is a multidisciplinary, multi-departmental, integrated financial services conglomerate.
It offers various services such as asset management, strategic private equity investments, arbitrage and investment banking.
The lock down in 2021 and 2022 had put almost all the business in the hands of the sweepers. But in these years finance companies were running in money.
Due to the lock down, a lot of money normally used for running the business went through finance companies to invest in the stock markets. Hence, a clear impact of these two years can be seen on the financial statements of VLS Finance.
VLS Finance reported profit for the financial year 2021-22 2.5 billion which is 18% higher than last year’s profit 2.1 billion
Its income for the financial year 2022 was 2.8 billion which is 33% more than the previous year. The debt-equity ratio of VLS is zero.
Along with stable financial performance, VLS Finance has been consistently rewarding its shareholders. It is paying dividend continuously from 2017 to 2022.
For the financial year 2022, VLS Finance has declared a dividend of 15%, i.e., 1.5 per share.
VLS Finance has a PB Ratio of 0.25 indicating that VLS Finance is currently undervalued.
#4 Power Finance Corporation
Another PSU to make it to the list is Power Finance Corporation (PFC).
PFC is a financial institution owned by the Ministry of Power, Government of India. PFC is virtually the electricity supplier to the power sector in India. PFC takes care of the financial needs of India’s power sector.
The financial position of PFC is yet another proof that not all Indian PSUs are a story of mourning. PFC has delivered stellar financial performance over the years.
For the financial year 2022, the profit of PFC was 100.2 billion more sales were reported 385.9 billion It is seen that profits have increased by 19% while sales have increased by only 2%.
This indicates a great profit generating potential on the part of PFC.
Like any other PSU, PFC is paying dividend consistently. In fact, PFC has been paying interim dividend frequently. PFC has the highest dividend growth rate.
For 2022, PFC paid a final dividend of 12%, i.e., 1.2 per share. In 2022, it paid interim dividend thrice – 60%, 25% and 20% respectively.
PFC has a PE ratio of 2.08 while the industry has a PE ratio of 19.5. A low PE ratio indicates that the stock is undervalued.
#5 Euflex
Uflex is India’s largest multinational flexible packaging material and solutions company.
Companies will always come up with new products, and they will always need new packaging for these products. Therefore, the packaging industry will always have customers.
Uflex seems to have made the most of this opportunity. Uflex is consistently making profits and is growing almost fast.
Uflex’s profit witnessed a CAGR growth of 39.2% over the last three years. Its debt-equity ratio is negligible. That’s why it looks like the Uflex has deep pockets.
Another feather in Uflex’s cap is its consistent rewards to shareholders. Uflex has paid dividends consistently since 2007.
In 2022, Uflex paid a dividend of 30% i.e. 3 per share.
Uflex has a PB ratio of 0.66, indicating that Uflex is undervalued.
investment takeaway
It can be seen from the above list that companies with strong business and deep pockets can deliver consistent returns and also promise capital gains.
An investor should keep in mind that when dividend paying companies Providing stability of returns, dividend payout is a deduction on profit that can be reinvested in the business.
Therefore a business’s earnings per share (EPS) can be low if the dividend per share (DPS) is too high. Hence one must carefully analyze whether the dividend payout is within the earning capacity of the company or not.
On the issue of PSUs, PSUs pay regular dividends and have strong business, but still, investors are skeptical about them. This is because historical trends suggest that the share prices of PSUs have been highly volatile.
They often do not move in sync with the market. Hence they pose risk to the investors.
When an investor decides to add stocks to his portfolio, he should take a holistic approach and look at all aspects carefully.
To know more about such stories, stay tuned to this forum.
Happy investment!
Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.
(This article is syndicated from) equitymaster.com,