PSU stocks: Should you consider high dividend paying shares?

PSU stocks such as GAIL Ltd, Indian Oil Corporation Ltd (IOC), Coal India Ltd, BPCL, ONGC Ltd and Oil India have high dividend yields in the 4-5 per cent range. RITES, Power Grid, CPCL, Balmer Lawrie & Company Ltd, Power Finance Corporation (PFC) and NFL, among others, offer a dividend yield of 3 per cent each. Brokerages expect some of these PSUs to be consistent dividend payers going ahead.

As per Axis Securities, GAIL offered a dividend per share of Rs 9.50 and has a dividend yield of 5 per cent. It recently announced a dividend of Rs 5.50 per share. Balmer Lawrie Investment Ltd announced Rs 33 per share dividend in the past 12 months and has a dividend yield of 5 per cent. IOC, Coal India, ONGC and Oil India command dividend yields of 4 per cent each.

Coal India has announced a second interim dividend of Rs.5.25 per share for the fiscal year 2023-24. The company has fixed February 20 as the record date for the dividend, with disbursement date set for March 12. Its board had declared first interim dividend in November 2023 at Rs 15.25 per share, which brings the total interim dividend for FY24 to Rs 20.5/share.

Elara Securities expects an annual dividend payout of Rs 20-23 per share by Coal India, which implies a 7 per cent yield. This brokerage finds the stock worth Rs 453.

In the case of ONGC, the board approved interim dividend of Rs 4 per share. In 9MFY24 a total dividend stood at Rs 9.75 per share (41 per cent payout of 9MFY24 earnings) and YES Securties expects another higher final dividend.

In the case of Oil India, Emkay Global said the company  will maintain dividend payout and it should be at least as per DIPAM guidelines of 30 per cent of PAT and/or 5 per cent of net worth.

The Oil India board may take a call on another interim dividend, though discussion with Govt will also happen. Otherwise, appropriate final dividends will come," it said.

“The government now sees monetisation of PSUs as a combination of dividends, stake sales and asset monetisation. PSU top management performance also now has a component of stock performance. Governance improvements could drive longer term rerating for SOEs," Jefferies said in a strategy note.

 

 

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