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Sunday, April 15, 2012

Dividend and Deep Value Gem: Shipping Corporation of India (SCI)

Shipping Corporation of India (SCI) is a dividend gem, trading at very reasonable valuations and is a Deep Value pick at today’s market prices. SCI has paid dividend twice in last financial year 2011, totaling up to 55% on its face value of Rs 10, thus delivering dividend income of Rs 5.5 on share price which is hovering around Rs 62 per share as we write this. This comes to a decent 9% annual income from dividends alone. 

SCI has been a dividend champion and paid dividends regularly since past twelve years. For some of these years, the dividend payout has been as high as 85%, and in 2003, the dividend payout was a whooping 200%.

Is SCI also a value pick at current prices. Let’s delve deeper into its financials. SCI is trading near lower band of past 52 weeks price range of low of Rs 47 to high of Rs 116. Pls look at long term chart of SCI from 2002 and we can observe that its pretty much trading at historically low prices. Thus its often a good starting point for a value investor to refer to charts and use dual power of technical analysis in his review.

At current price of 62 per share, SCI is trading at a market cap of Rs 2890 crores. For a giant like SCI, this is very reasonable valuations, as they are holding cash of about Rs 2156 crores. Thus if you buy the whole company at its market cap, you will be compensated by its huge cash reserves and your holding price will come down by 75%!

The Book Value, another key tool available with value investors is at Rs 154 per share. Thus you are buying a single share at Rs 62 and getting 60% discount on its Book Value as well. The story gets even better if you look at yearly P&L statement, as SCI has delivered stellar results for past 5 years.

This is one scrip which will recover fast as the market conditions improve, and deliver tremendous bang for its buck in next year or so. Thanks for visiting this site and reading this article.

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