5 Consistent Dividend Paying Stocks that Surged Up to 20% Today Thanks to a New Policy Payout

Gujarat Mineral Development Corporation (GMDC), up over 15%.

Gujarat Industries Power locked in the 20% upper circuit band at Rs 91.

Gujarat State Fertilizers (GSFC), Gujarat Alkalies, Gujarat Narmada, Gujarat Gas, and Gujarat State Petronet, were all up in the range of 5-15%.

What's brewing in these Gujarat based stocks today?

Well, the sudden movement in these stocks has something to do with the Gujarat government's latest announcement on dividend distribution and bonus shares policy.

Continue reading...

New dividend policy

On Tuesday, 25 April 2023, the Gujarat government announced a new policy for minimum level of dividend distribution and bonus shares to shareholders of listed companies and public sector undertakings (PSUs) of Gujarat.

The government has now mandated a minimum of 30% of profit after tax or 5% of net worth, whichever is higher, to be a minimum level of dividend declared for shareholders.

The government also notified about bonus shares, stock splits, and buybacks.

Gujarat based PSUs that have defined reserve and surplus equal to or more than 10 times their paid-up equity share capital are required to issue bonus shares to their shareholders.

For buybacks, the PSU having a net worth of at least Rs 20 billion (bn) and cash and bank balance of Rs 10 bn is mandated to exercise buyback of shares.

For stock splits, the state mandated that companies should split shares where the company's market price or book value exceeds 50 times of its value, provided its existing face value of a share is more than Rs 1.

How did the industry react?

Market participants were pleased with the news. And rightly so. This move will go a long way in creating shareholder value.

Most of the listed Gujarat-based PSUs, 7 in particular, saw a steep rally on the back of above news.

Let's take a look at each one of these companies and how they're set up for 2023.

#1 Gujarat Mineral Development Corp (GMDC)

GMDC Ltd is a mining and mineral processing company. The company is the largest merchant seller of lignite in India. It offers lignite for various industrial units including textiles, chemicals, ceramics bricks, and captive power.

In recent months, shares of the company have come under pressure, primarily due to two reasons.

Good monsoon - The company's management highlighted in the concall that due to good monsoon, the company's operations for three areas were affected. The effect was visible in the company's second quarter earnings for FY23.

Operational issues at Surat plant - The company's Tadkeshwar project in Surat used to generate a major chunk of its revenue owing to its volumes and active customer base.

Lately, this project has not been doing well, and is closed because of safety issues. The company's management said it'll take approximately 2 quarters before the situation stabilizes.

With the recent dividend news, shareholders have finally sighed a relief as the stock rallied over 15% on an intraday basis today. In the past one year, shares of the company have fallen around 21%.

#2 Gujarat Industries Power

Next on this list is Gujarat Industries Power.

Gujarat Industries is a Vadodara-based listed public limited company engaged in the business of power generation. It was incorporated in 1985 and is promoted by three leading Gujarat PSUs viz. GUVNL, Gujarat Alkalies, and Gujarat State Fertilisers.

The company is engaged in the business of electrical power generation. It has a diversified portfolio of thermal (gas and lignite), wind and solar power plant assets in the state of Gujarat.

Shares of the company were locked in the 20% upper circuit band in early trade today. In the past one year, shares of the company have fallen 6%.

#3 Gujarat Alkalies

Next on the list is Gujarat Alkalies and Chemicals Ltd (GACL), one of the largest producers of caustic soda in India.

The company's products are used in industries such as textile, alumina, water treatment, petroleum, plastic, fertilisers, pharmaceuticals, agrochemicals, etc.

Over the years, the company has also established its brand name and reputation in the export market. The company's exports have almost doubled in the past five years.

In the past one year, shares of the company have underperformed benchmarks and remained under pressure owing to its commodity nature.

Commodity stocks tend to be highly cyclical. The chemical sector is going through a rough patch right now as even the fundamentally strong companies from the lot have fallen around 25-30%.

As part of its expansion strategy, the company has taken a big capex for expanding its plant capacity for caustic soda.

Gujarat Alkalies share price soared over 10% today following the dividend policy changes.

#4 Gujarat Narmada

Next on the list is Gujarat Narmada Valley Fertilizers & Chemicals (GNFC), a joint sector enterprise promoted by the Gujarat State Investments (GSIL) and Gujarat State Fertilizers & Chemicals (GSFC).

The company operates businesses mainly in the chemical and fertilizer space apart from having a small presence in the IT segment too.

In the chemical segment, it has a product portfolio of various bulk chemicals that are used in industries for manufacturing various specialty chemicals as well as end products.

Shares of the company came under pressure in the past one year as input prices soared post the Russia-Ukraine war.

In its latest concall, the company said that input prices have started to cool down and prices of Toluene Diisocyanate (TDI) have stated to go up, which bodes well for GNFC.

The company's management also said that work at the Dahej Plant is expected to bring cost competitiveness.

Today, the stock rallied 8% to hit a high of Rs 578 on the BSE.

#5 Gujarat Gas

Next on this list is Gujarat Gas. The company is engaged in the business of natural gas in India. It's one of the largest players in the city gas distribution (CDG) business.

The company's stock has remained volatile in recent months owing to the centre revising LPG prices a couple of times.

This has added to margin pressure for most of the CGD players. But experts suggest that once pricing power comes back after the cabinet clears the policy, the tide may turn for CDG companies.

While other Gujarat-based PSUs saw a steep rally post the policy changes, Gujarat Gas share price only gained a percent. In the past one year, shares of the company have fallen around 13%.

#6 Gujarat Ambuja Exports

Next on this list is Gujarat Ambuja Exports (GAEL). Founded in 1991, GAEL is engaged in processing maize, soya, and cotton. It converts them into starch and starch derivatives, soya meal, soya oil, and cotton yarn.

Gujarat Ambuja was one of the popular stocks of 2022 when Saurabh Mukherjea picked stake in the company.

Recently, the company undertook a capex plan to increase capacity at its greenfield project and also increase the in-house maize storage capacity of 120,000 tonnes.

In the past one year, shares of the company have fallen around 22%. The dividend policy changes had little effect on the company's stock price as it gained just 1% today.

#7 Gujarat State Fertilizers & Chemicals

Last on this list is Gujarat State Fertilizers.

Incorporated in 1962, Gujarat State Fertilizers is engaged in manufacturing of various fertilisers and industrial products like plastics & synthetic rubbers and man-made fibres.

In recent years, the company's profitability has improved owing to its fertiliser segment performing well.

In the last five years, the company's revenue has grown at a CAGR of 7.9%, driven by improvement across all its business segments. The net profit also grew at a CAGR of 13.7% on the back of its backward integration efforts.

Following the dividend policy changes, shares of the company gained 20%. Volumes at the counter jumped multifold. However, it's not just the dividend news that has got investors excited about GSFC.

The company is undertaking several modular-size capex projects worth Rs 7.7 bn, including an ammonium sulphate plant, an HX crystal project, a solar power project, and revamping its urea plant at Vadodara to its production capacity.

All the projects will be funded through internal accruals and surplus liquidity which will help the company maintain its debt-free status.

It also plans to set up a green hydrogen plant in its Vadodara plant to support the government's green initiatives.

Now here's the exciting part...

GSFC holds a significant stake in other listed Gujarat-based PSUs. Here's how the company's holding look like as per the company's annual report:

GSFC Investments

Company Name	No of shares	Current Price (Rs)	Total Value (Rs)
Gujarat Narmada	3,07,79,167	587.0	18,067,371,029
Gujarat Industries Power	2,23,62,784	91.3	2,042,393,063
Gujarat Alkalies	16,55,040	735.0	1,216,454,400
Gujarat Gas	4,69,14,475	463.0	21,721,401,925
Bandhan Bank	11,36,000	224.0	254,464,000
IDBI Bank	5,49,440	53.1	29,153,286
Mangalore Chemicals	5,79,000	93.0	53,847,000
Total value in Rs billion			Rs 43.4 billion

Source: Equitymaster, BSE

The company's incremental dividends add to the bank balance, making the company much more attractive than the rest.

To know more, check out the company's financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...