Is This Large Cap Still a Good Dividend Buy, Amid 255% Gain?

  • Stock Market Analysis

Power Finance Corporation Limited (NS: PWFC ), a state-owned NBFC with a market capitalization of INR 1,24,446 crore has delivered a tremendous return to investors in the last one year, as its share price depicted a massive rally of 255%.

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The stock was one of the favorites among dividend seekers with yields going up in double digits a year ago. However, even after such a gigantic rally should investors still consider it from the dividend perspective?

Unfortunately, the dividend payout hasn’t been able to keep up with the price gain (which is obvious). The stock which was once trading at a dividend yield of 12% is now down to a mere 2.8%.

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Although the company still pays dividends on a consistent basis, with INR 10 per share in CY23, the yields are not so attractive anymore.

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Looking at the dividend yield chart, the stock is trading at the lowest yield in the last one year. These charts depict the viability of buying dividend stocks based on historical yields by taking both the share price and dividend per share (DPS) into consideration.

The ideal time to buy dividend stocks is when this chart trends up which simply means either the DPS is increasing or the price is dropping. The opposite is true in the case of a falling chart, as in the case of PFC, where the DPS is almost the same and the price has rallied massively.

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The last nail in the coffin is the overvaluation of this counter. The stock is trading 14.2% above its fair value of INR 332.7, which also makes it an avoid candidate from the valuation perspective.

So when can be the ideal time to accumulate this strong dividend-paying company? I would say, waiting for the yields chart to take a reversal and once the downtrend gets negated there, that would likely be the right time to start considering this counter for the portfolio.

Disclosure: I have PFC shares in my portfolio

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X (formerly, Twitter) - aayushxkhanna

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  • namami ghosh @namami ghosh
    excellent 💯👍👏, insightful perspective for dividend seekers.... thank you, boss 🙏🙏🙏🙏🙏🙏
    Like 1
    • Aayush Khanna @Aayush Khanna
      @namami ghosh You're welcome, Namami.
      Like 0
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  • JAYESH PARMAR @JAYESH PARMAR
    thankyou for your efforts
    Like 1

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