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  • Jun 9, 2022 - Looking for Fundamentally Strong Dividend Paying Stocks Available For Cheap? Here are the Top 5...

Looking for Fundamentally Strong Dividend Paying Stocks Available For Cheap? Here are the Top 5...

Jun 9, 2022

Looking for Fundamentally Strong Dividend Paying Stocks Available Cheap? Here are the Top 5

A friend that is always available to join you for dinners is important.

A friend that does not meet regularly but goes on a vacation with you is even more important.

But a friend who meets you regularly, joins you on a vacation, and pays some of your bills is a pure blessing!

We rarely find such friends, right?

Now think about the above example in terms of investing in the stock market.

A stock which is fundamentally strong is an obvious choice.

A stock which pays regular dividends consistently and proves to be a hedge against inflation is even more important in the current environment.

Now combine the two and your investing case becomes simple. On top of this, the stock is available for cheap because of the recent correction.

With the help of Equitymaster's powerful stock screener, we've found five such stocks which are consistent dividend payers and look fundamentally strong.

These stocks are also available at cheap prices.

Read on to find out which 5 stocks fit this criterion...

#1 Indian Hotels Company

When we talk about hotels in India, it is impossible not to mention the name of the Indian Hotels Company (IHCL). Taj, Vivanta, Ginger, all of these reputed, elegant hotels, are owned by IHCL.

A giant old fruit-bearing tree with deep roots will stand tall against all kinds of weather. During difficult times it may shed leaves and even lose fruits, but it will never fall.

IHCL is exactly like this tree. 2022 brought the market down off its high. Many companies had to bite the dust of global downfall. But among all this, IHCL's share price stood tall.

IHCL's share price has been on an upward trend in the face of a downward trending market. It has gone up 25% this year.

Of course, Covid-19 had taken a toll on the hotel business. IHCL has been reporting losses for fiscal 2021 and 2022.

2021 and 2022 were exceptional years. Hence performance in these two years does not really reflect the position of a company.

However, the situation post-Covid-19 is changing. In fact, for Q4 of 2022, IHCL reported a quarterly profit of Rs 715.7 m, which is around 173% higher compared to previous year.

When it comes to rewarding its shareholders, IHCL has always aced the game. IHCL has paid continuous dividends to its shareholders since its establishment, with an exception of a few years.

Even in heavy losses and difficult times, IHCL managed to reward its shareholders.

To know more about the company, you can have a look at its factsheet and quarterly results.

#2 Oil India

A general stigma exists around public sector units (PSUs). PSUs are believed to be poor-performing units of government that spend more money than they make.

However, this is not true for all PSUs. Certain PSUs have performed very well. In fact, these PSUs have surpassed stock market expectations.

One such PSU is Oil India. Oil India, a Navratna PSU, is the second-largest Indian-government-owned hydrocarbon explorer and producer. It is under the ownership of the Ministry of Petroleum and Natural Gas.

Oil India has seen a steady increase in sales and profits over the years. It is a shining star for the government in the basket of PSUs.

One of the best things for investors while investing in PSUs is consistent dividends. PSUs are required to pay dividends mandatorily.

Hence investors of Oil India have been enjoying a consistent dividend payout since 2010. In fact, the company has often paid interim dividends too.

For 2022, it has already paid two interim dividends of Rs 3.5 and 5.75 while the final dividend is yet to be declared.

Oil India's share price withstood the fall of the market in 2022. On a YTD basis, Oil India's share price has gone up by 42%. This is a strong figure, especially when compared to volatility of the markets in 2022.

Oil India is trading at a profit to book (PB) ratio of 0.94. If the PB ratio is lower than 1, then the stock is considered undervalued generally.

To know more about the company, you can have a look at its factsheet and quarterly results.

#3 VLS Finance

VLS Finance is a reputed name in the finance industry. Established in 1986, VLS Finance is a multi-faceted, multi-divisional, integrated financial services group.

It provides various services like asset management, strategic private equity investments, arbitrage, and investment banking.

Lock-down in 2021 and 2022 had sent almost all business to the cleaners. But finance companies were rolling in money in these years.

Due to the lock-down, a lot of money that was normally used for running a business went into investing in stock markets through finance companies. Hence, an obvious impact of these two years can be seen on the financial statements of VLS finance.

For fiscal 2021-22 VLS finance reported a profit of Rs 2.5 bn which is 18% higher compared to last year's profit of Rs 2.1 bn.

Its income for fiscal 2022 stood at Rs 2.8 bn which is 33% higher compared to last year. The debt to equity ratio of VLS is zero.

Along with stable financial performance, VLS Finance has been giving consistent rewards to its shareholders. It has been paying dividends from 2017to 2022 constantly.

For fiscal 2022, VLS Finance has declared a dividend of 15% i.e., Rs 1.5 per share.

VLS Finance's PB ratio is 0.25 which indicates that currently VLS Finance is undervalued.

To know more about the company, you can have a look at its factsheet and quarterly results.

#4 Power Finance Corporation

Another PSU making its place on this list is Power Finance Corporation (PFC).

PFC is a financial institution under the ownership of the Ministry of Power, Government of India. PFC is quite literally the power supplier of the power sector in India. PFC takes care of the financial need of India's power sector.

PFC's financials is another proof that not all Indian PSUs are a sob story. PFC has given a stellar financial performance for long years.

For fiscal 2022, PFC's profit stood at Rs 100.2 bn and sales were reported at Rs 385.9 bn. It is observed that profits have gone up by 19% while sales have only risen by 2%.

This indicates a great profit generation capacity on PFC's part.

PFC like any other PSU has been consistently paying dividends. In fact, PFC has been often paying interim dividends too. PFC has one of the highest dividend growth rates.

For 2022, PFC paid a final dividend of 12% i.e., Rs 1.2 per share. In 2022, it also paid interim dividends thrice - 60%, 25%, and 20% respectively.

PFC's PE ratio is 2.08 while the industry's PE ratio is 19.5. A lower PE ratio indicates that the stock is undervalued.

To know more about the company, you can have a look at its factsheet and quarterly results.

#5 Uflex

Uflex is India's largest multinational flexible packaging materials and solutions company.

Companies will always come up with new products, and they will always need new packaging for these products. Hence, the packaging industry will always have customers.

Uflex seems to have made the most of this opportunity. Uflex has been consistently delivering profits and almost on an increasing pace.

Uflex's profit saw a CAGR increase of 39.2% over the past three years. Its debt-equity ratio is negligible. Hence it seems that Uflex has deep pockets.

Another feather in Uflex's hat is consistent rewards to shareholders. Uflex has constantly paid dividends since 2007.

In 2022, Uflex paid a dividend of 30% i.e. Rs 3 per share.

Uflex has a PB ratio of 0.66, which indicates that Uflex is undervalued.

To know more about the company, you can have a look at its factsheet and quarterly results.

Investment Takeaway

It can be seen from the above list that companies with strong business and deep pockets can deliver consistent returns and also promise capital gains.

An investor should keep in mind that while dividend-paying companies offer the stability of returns, the dividend payment is a cut on the profit that can be reinvested in the business.

Hence earnings per share (EPS) of the business may reduce if the dividend per share (DPS) is very high. So one should carefully analyse whether dividend payout is within the earning capacity of the company.

On the point of PSUs, PSUs pay regular dividends and have strong business, but still, investors are sceptical about them. That's because historic trends show that PSUs' share prices have been highly volatile.

They often do not move in tandem with the market. Hence they pose risk to investors.

When an investor decides to add a stock to his portfolio, he should take a holistic approach and look into all aspects carefully.

To know more about such stories, stay tuned to this platform.

In the meantime, also check out the below video where Richa Agarwal explains the concept of dividend investing.

Happy Investing!

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...

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