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Sunday, April 8, 2012

Dividend Warriors – Best Dividend paying Stock - HCL Infosystems

HCL Infosystems has always prospered in shadow of its more aggressive and famous sibling – HCL Technologies. But there is a hidden fact about HCL Infosystems, which most investors have no clue on. It’s simply the best Dividend paying stock on NSE and BSE. Sample this, in 2011, HCL Infosystems has paid dividend after each quarterly result – probably the only company to pay four dividends in one year. It has paid dividends to its stock holders three times a year from last eight years, every year. Not only this, HCL Infosystems is a regular dividend paying company from last 15 years. But you may ask, What is the big deal in a dividend payment, don’t we buy stocks for capital appreciation or price rise, not for paltry yearly dividends.

The dividend outlay from HCL Infosystems dividend has been a whooping 350% in 2011. On a face value of Rs 2 per stock, this is total of Rs 7 per stock that you hold. On the current market price of Rs 45 for this company, you are receiving tax-free income of 15.5% per year. Now your turn to guess, which investment provides you a tax-free return of 15.5% in a year? Not many, I can assure you. For this year 2012, HCL Infosystems has already paid out 50% of dividend for the one quarter gone by.   

Not only dividends, you can even own this stock for the Deep Value that it provides to investors and current attractive prices. At Rs 45 per share, stock is trading at lower band of 12 month price range of Rs 38.8 to Rs 124. This means your downside risk is limited and upside is about 3X from here. The market cap is very reasonable, you can buy the entire company at just about 1036 crores, which is very attractive for a firm whose annual revenues are 10,966 crores. Net profits in 2011 were at 177 crores, which is low, as the firm deals in Hardware, Networking and India business primarily which have low profitability and lot of pass-through revenues. Hence the stock manages to stay below the radar of most hot-shot FII and Mutual fund owners, which tend to focus on the more glamorous HCL Technologies instead. Good news for value pickers like us!

Firm is currently holding cash of 234 crores which is 25% of current market cap and even reduces your ownership cost by 25%. Shareholding of its promoters is more than 50% and general public owns just 9.9% of this company. Other fundamental ratios are as comfortable and decent as well. Look at the famous or rather infamous P/E ratio which is pretty low at 5.85, justifying its Deep Value behavior.

Book Value is high at Rs 87.36 per share, meaning you are getting 87 rupees of value per 45 rupees of investment. Or in other words, you are getting 48% discount or huge off-season sale or discount to buy this asset. In summary HCL Infosystems is an Amazing asset, best dividend paying stock and at very reasonable valuations. It’s surely a multi-bagger and is a profitable asset to hold for many years. 

1 comment:

  1. Hi Now HCL Infosys is @ 38.Please advice whethr it will be a value buy at this level.


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