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Dividend Machine: This Large-Cap is Up 200% in a Year, Should You Buy?

Published 10-06-2024, 05:31 pm

When buying high dividend-paying stocks, investors generally have to compromise on the stock’s ability to deliver capital gain. However, a very few of dividend stocks are also capable of cheering investors with their growth potential, and one such counter is Power Finance (NS:PWFC) Corporation Limited (PFC).

It is a non-banking finance company that provides financial products related advisory, and other services to the power sector in India and has a market capitalization of INR 1,62,249, making it the 52nd largest listed entity in India. It is an ISO-certified Maharatna company that has received the highest AAA ratings from three domestic credit rating agencies - CRISIL (NS:CRSL), ICRA (NS:ICRA) & CARE (NS:CREI).

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On the financial front, the company clocked a record high revenue and profit of INR 91,174.8 crore and INR 19,761.1 crore, respectively in FY24. this translates into a net margin of 21.67%, which is commendable for any large-cap. In fact, this is the highest margin since FY16.

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InvestingPro’s financial health check has also rated the stock 3 out of 5, qualifying it as a portfolio stock. Any rating below 3 is a signal of bad fundamentals and therefore such stocks can become troublesome. It is a great primary layer to screen high-quality stocks.

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Coming to its charm - Dividends. The stock is known for its hefty payouts for a long time. The stock has continuously given payouts to investors for over a decade now, except for the year 2019. Currently, it is trading at a yield of 3.02% which is not at all bad, but the yield has come down due to a strong capital appreciation of 216.6% in the last 12 months.

Hence, investors holding this counter are enjoying both the worlds of profit - dividends and capital gain. Looking at the fair value via 4 complex financial models, the stock has a true value of INR 526.7 per share, depicting an 8.4% upside from the CMP of 485.8. However, a fall to the nearest support of INR 400 can further increase the yield and capital growth potential if long positions are initiated over there.

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Read More: A Strategic Guide to Finding Undervalued Stocks in Post-Election Markets

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