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Dividend paying stock picks
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h have gone up from 55.7 per cent in FY07 to 62.12 per cent in FY08. Besides, it entry into the growing offshore segment, where the demand and the realisations are relatively high, should further help increase revenue and margins.
It has recently taken delivery of a third Anchor Handling and Towing Supply Vessel (AHTS). This is a specialised vessel which is used for deep sea oil exploration activity.
As a result of its efforts, contribution of offshore revenues to total revenues has gone up from mere 3.55 per cent (Rs 23.9 crore) in FY07 to 19.46 per cent (Rs 165.5 crore) in FY08. Apart from good dividend yield, the stock can deliver about 20-25 per cent in the next one year.
TN Newsprint
Tamilnadu Newsprint & Papers, one of the leading integrated players in the paper industry, offers a dividend yield of 5 per cent and trades at a reasonable 4.8 times its FY09 estimated earnings.
The company has been growing consistently in terms of revenue and cash profits. This is primarily on account of growing demand for paper. The growing economy and particularly the growth in print media have been the prime reasons for the higher paper demand.
Driven by higher demand and the benefits of its backward integration, the company has been able to sustain margins at about 26 per cent (among the best in the industry) even as input prices have been on the rise.
Going forward, the benefits will also accrue on account of ongoing capacity expansions, whereby the company is increasing its pulp (raw material) production capacities from 170,000 tonne to 260,000 tonne by Q4FY08 and paper capacity from 230,000 tonne to 400,000 tonne expected to be commissioned by June 2010. These expansions will help the company to effectively manage input costs and simultaneously sustain growth rates.
Savita Chemicals
On the back of higher product prices and stable base oil prices, Savita Chemicals, a manufacturer of petroleum specialty products, recorded better than expected results for FY08.
It reported a 13 per cent improvement in net sales to Rs 919 crore and over 30 per cent increase in net profit to Rs 62 crore. Their operating profit margin of about 10 per cent is likely to come down as high crude oil prices could increase the price of its raw material-base oil.
A 20 per cent growth rate in the transformer oil market of Rs 1,500 crore should benefit Savita Chemicals as this segment accounts for 65 per cent of its revenues.
The company is expanding capacity by 50,000 kilo litres (kl) to 2.6 lakh kl at a cost of Rs 10 crore. The entry of new transformer manufacturers and the planned capacity additions on the power generation side is expected to increase demand for transformer oil, which augurs well for the company. At Rs 253, the stock is available at an attractive 6 times it’s FY09 estimated earnings of Rs 44 and should fetch decent returns.
These stocks can be a safe bet in such turbulent times. These companies have strong fundamentals and future growth potential. The dividend yield ensures that your investments keep giving you returns while you wait for a bull run in the stock market.
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