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MUMBAI: Looking for value picks? Turn to New Delhi. PSU stocks aren't high on glam quotient, but they could yield outsized returns - especially after the round of recent selloff in the companies owned by the government.
These stocks are trading well below their long term averages, and they offer high dividend yields.
Investors have been selling PSU stocks on concerns that the government may sell stakes in them to fund its growing commitments, and lack of resources to support those commitments.
Six PSU stocks are trading at a PE multiple between 2 and 5 times their trailing 12 months earnings. These include NLC India, Oil India, REC, Power Finance Corporation, Coal India and SJVN, all are currently offering a dividend yield of over 10%. Analysts believe that it is time to look for cash-rich PSUs with a good track record of dividend yields.
“There is a lot of value in fundamentally strong PSU stocks, given their recent price correction.” said Rajat Sharma, Founder & CEO, Sana Securities. “Since dividend yields of some of the stocks like ONGC, Coal India, SJVN, Bharat Electronics and Engineers India among others are so attractive, investors can consider investing in them for regular dividends.”
Stocks like BPCL, BHEL, Chennai Petro, NBCC, Nalco, SAIL among others have declined between 15% and 25% in the last one month at a time benchmarks are nearing their all-time highs.
The Nifty PSE index has declined 12% in the last one month as against the 5% rise in Nifty 50. In the last one year, Nifty 50 has rallied 6% while the Nifty PSE index has plunged 33%.
Housing & Urban Development Corporation, Engineers India, Gail India, Oil & Natural Gas Corp, Balmer Lawrie & Co, NMDC and Ircon International are offering a dividend yield between 6% and 10%.
“When the interest rates in India have come down below 5%, the PSUs which are trading above 5% yield are certainly a good bets” said G Chokkalingam, CEO, Equinomics Research & Advisory. “Though some companies may reduce the dividend because of losses in the first two quarters, many will still distribute dividends to reduce the government's fiscal deficit.”
Coal India has a cash and cash equivalent of Rs 28,400 crore as against its market cap of Rs 68,622 crore. Cash to market cap of Oil India is 48% whereas Engineers India and Ircon Intl cash to mcap ratio is over nearly 70%.
Some analysts caution investors against buying those PSUs which are in the government divestment list.
“Investors have been consistently backing an attractive dividend yield of PSUs with every correction for sometimes, but this has not played out well for many stocks,” said Arjun Yash Mahajan, head - institutional business, Reliance Securities. “It would be prudent to wait for short to mid-term investors till at least Budget 2021-22, as that will give everyone a sense about the sources of funding for the government."
These stocks are trading well below their long term averages, and they offer high dividend yields.
Investors have been selling PSU stocks on concerns that the government may sell stakes in them to fund its growing commitments, and lack of resources to support those commitments.
Six PSU stocks are trading at a PE multiple between 2 and 5 times their trailing 12 months earnings. These include NLC India, Oil India, REC, Power Finance Corporation, Coal India and SJVN, all are currently offering a dividend yield of over 10%. Analysts believe that it is time to look for cash-rich PSUs with a good track record of dividend yields.
“There is a lot of value in fundamentally strong PSU stocks, given their recent price correction.” said Rajat Sharma, Founder & CEO, Sana Securities. “Since dividend yields of some of the stocks like ONGC, Coal India, SJVN, Bharat Electronics and Engineers India among others are so attractive, investors can consider investing in them for regular dividends.”
Stocks like BPCL, BHEL, Chennai Petro, NBCC, Nalco, SAIL among others have declined between 15% and 25% in the last one month at a time benchmarks are nearing their all-time highs.
The Nifty PSE index has declined 12% in the last one month as against the 5% rise in Nifty 50. In the last one year, Nifty 50 has rallied 6% while the Nifty PSE index has plunged 33%.
Housing & Urban Development Corporation, Engineers India, Gail India, Oil & Natural Gas Corp, Balmer Lawrie & Co, NMDC and Ircon International are offering a dividend yield between 6% and 10%.
“When the interest rates in India have come down below 5%, the PSUs which are trading above 5% yield are certainly a good bets” said G Chokkalingam, CEO, Equinomics Research & Advisory. “Though some companies may reduce the dividend because of losses in the first two quarters, many will still distribute dividends to reduce the government's fiscal deficit.”
Coal India has a cash and cash equivalent of Rs 28,400 crore as against its market cap of Rs 68,622 crore. Cash to market cap of Oil India is 48% whereas Engineers India and Ircon Intl cash to mcap ratio is over nearly 70%.
Some analysts caution investors against buying those PSUs which are in the government divestment list.
“Investors have been consistently backing an attractive dividend yield of PSUs with every correction for sometimes, but this has not played out well for many stocks,” said Arjun Yash Mahajan, head - institutional business, Reliance Securities. “It would be prudent to wait for short to mid-term investors till at least Budget 2021-22, as that will give everyone a sense about the sources of funding for the government."
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