While scouting for dividend stocks from the powerful InvestingPro+ screeners, one stock that caught my attention is Vedanta (NS:VDAN) Limited. Everyone on the street knows the stock is known to pay hefty dividends to investors, but another fact that surfaced is that the stock is also undervalued.
Vedanta operates as a diversified natural resources company in India and has a market capitalization of INR 1,25,561 crore. The management is looking to diversify all its businesses therefore we might see the company splitting into many, but that will take a lot of time.
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Talking about its main attraction, the stock showers dividends, unlike any other large-cap. In CY 2022 and 2023, it shelled out dividends worth INR 81.5 per share and INR 62.5 per share. You can also see the dividend history in the form of histograms on InvestingPro+ to better gauge the trend.
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With a quick glance over ProTips, investors get 2 key pieces of information - significant dividend payment to shareholders and 23 consecutive years of dividend payment history. In fact, if someone had bought the stock 3 years ago, the dividend payments would have covered the entire purchase price of the stock. And even at the current price, the stock is trading at a massive dividend yield of 18.5%, the highest in the entire large-cap space.
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Coming to valuations, the best way to determine whether the stock is undervalued or overvalued is to look at its fair value. InvestingPro+ has calculated 14 different intrinsic values using different financial models to estimate the broad range of values. Then the mean is calculated to negate outlier values and come at a more realistic value, which in this case is INR 379.15, depicting a 12.2% upside from the CMP of INR 337.8.
However, ProTips also protects investors from jumping the gun. Here, it suggests that the stock is overbought as per RSI, without you having to look at the chart. This warning is given every time when the RSI is over the overbought reading of 70 on the daily time frame so that investors can wait for a retracement to fetch a better price.
On the daily chart, the nearest support is around INR 290 which is where a long opportunity can be explored.
InvestingPro+ is one of the most advanced stock analysis tools in the world which gives institutional-grade capabilities to retail investors at a fraction of the cost. But what's more interesting is that InvestingPro+ is currently available at a steep discount of up to 69% or INR 526/month. Try this revolutionary tool which totally removes the requirement of you having to learn financial modeling to calculate the accurate intrinsic value and much more, by clicking here.
X (formerly, Twitter) - Aayush Khanna