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6 Penny Stocks with Solid Growth and Zero Debt

Mar 10, 2023

6 Penny Stocks with Solid Growth and Zero Debt

Investors just love the upside that penny stocks provide, don't they? But most people aren't aware of their extremely volatile nature.

That is why you need to separate men from the boys, in other words, choose the fundamentally strongest companies from the penny stocks category.

This will ensure that the downside is capped in case of a market wide meltdown.

If you're looking for fundamentally strong penny stocks, look no further!

We've compiled a list of six penny stocks that have shown solid growth over the past few years and are debt free at present.

Before we move on, it's important to remember that investing in penny stocks carries significant risks. So, while we're excited to share these top picks with you, we urge you to approach them with caution.

Let's get started...

#1 JM Financial

First on the list is JM Financial.

The flagship company of the group, JM Financial is a holding company engaged in various financial services business on its own and through its subsidiary and associate companies.

The group has developed a strong franchise in key operating segments such as investment banking, platform AWS, distressed credit and mortgage lending.

JM Financial's dividend track record goes back to 1996 when the company declared a dividend of Rs 1.2 per share.

Since 2002, the company has paid out consistent dividends without a gap. The dividend payout for 2022 was much higher as compared to previous years, making JM Financial one of the companies which could announce an even bigger dividend payout this year.

For financial year 2023, the company has already declared an interim dividend of Rs 0.9 per share.

JM Financial Dividend Payout History

Year Ending Dividend Per Share (Rs) Dividend Payout* (%)
Interim Dividend 2023 0.90 -
31-Mar-22 1.65 48.0
31-Mar-21 0.50 27.2
31-Mar-20 0.20 13.2
31-Mar-19 1.00 75.5
31-Mar-18 1.80 78.7
31-Mar-17 1.50 111.7
31-Mar-16 1.45 101.9
31-Mar-15 1.35 135.5
31-Mar-14 1.00 106.3
31-Mar-13 0.90 151.0
Data Source: Ace Equity
Standalone Data

On a standalone basis, the company has a total debt of Rs 7 million (m) and its debt to equity ratio stands at 0.

In recent years, the company has strengthened its investment banking segment.

JM Financial Earnings Growth (2018-2022)

Year 2018 2019 2020 2021 2022
Sales Growth (%) 531.8 -45.1 61.1 31.2 61.8
Profit Growth (%) 79.6 -41.9 14.4 37.6 87.1
ROE (%) 9.2 4.5 5.1 5.8 9.1
ROCE (%) 12.1 5.4 6.5 7.4 11.7
Data Source: Ace Equity

In the past five years, shares of the company have corrected over 50% and they currently trade at Rs 65.

chart

The company trades at a price to earnings (PE) multiple of 8.6 times and a price to book value multiple of 0.7. Whereas the industry average is 13.4 times and 2.1, respectively.

#2 International Conveyors

Second on this list is International Conveyors.

The company is engaged in the manufacturing of PVC covered fire retardant and antistatic conveyor belting. These are mainly used in underground mining.

The company has diversified its revenue stream over the years by engaging in wind power generation and trading of steel cord conveyor belts and fasteners.

International Conveyors' dividend track record goes back to 1997 when it initially declared a dividend of Rs 1.5 per share.

Since its listing on the bourses in 2005, the company has paid dividends consistently. The dividend payout for 2021 and 2022 is much higher compared to earlier years, so it could declare similar payout this year too.

International Conveyors Dividend Payout History

Year Ending Dividend Per Share (Rs)
31-Mar-22 1.0
31-Mar-21 1.0
31-Mar-20 0.2
31-Mar-19 0.1
31-Mar-18 0.1
31-Mar-17 0.1
31-Mar-16 0.1
31-Mar-15 0.3
31-Mar-14 0.3
31-Mar-13 0.3
Data Source: Ace Equity

The company has total debt of Rs 193 million (m) and its debt to equity ratio stands at 0.09.

As International Conveyors operates in a niche segment, there aren't many competitors engaged in this space.

2022 was a good year for the company on the back of higher export orders. Though the impact was offset by rising raw material prices which the company wasn't able to pass on.

International Conveyors Financial Snapshot

Year 2018 2019 2020 2021 2022
Sales Growth (%) -6.1 52.1 15.3 71.6 21.2
Profit Growth (%) -274.7 0.9 211.4 161.1 -2.7
ROE (%) -4.2 -3.9 4.7 12.1 8.8
ROCE (%) 1.4 2.7 6.0 14.1 14.2
Data Source: Ace Equity

The company's growth is linked to the growth of underground mining operations. So the recent lithium discovery could possibly be a good thing for the company as its shares have remained under pressure in the past one year.

chart

Few other reasons behind the recent decline include persistent selling by foreign investors (FIIs). In September 2021, FIIs had 17.7% stake in this penny stock. Over the next few quarters, FIIs reduced their holding consistently and the current FII stake stands at 0.05%.

Interestingly, promoters of the company are showing skin in the game and have increased exposure for the past six quarters...exactly when FIIs started to sell.

To know more, check out International Conveyors latest shareholding pattern.

#3 Rubfila International

Third on this list is Rubfila International.

Operating since 1994, the company is promoted by Rubpro Sdn Bhd, Malaysia and Kerala State Industrial Development Corporation. Rubfila International is reputed to be the largest rubber thread manufacturer in the country.

It has a consistent track record of paying dividends and the payout per share have only increased over the years.

Rubfila International Dividend History

Year Ending Dividend Per Share (Rs) Dividend Payout (%)
31-Mar-22 1.8 22.1
31-Mar-21 1.3 23.3
31-Mar-20 1.2 39.5
31-Mar-19 1.0 27.8
31-Mar-18 1.0 21.5
31-Mar-17 0.8 25.9
31-Mar-16 0.5 26.9
31-Mar-15 0.8 23.9
31-Mar-14 0.6 27.9
31-Mar-13 0.6 19.5
Data Source: Ace Equity

In 2021, Rubfila International declared a turnover of Rs 2.7 billion (bn), the highest ever in the history of the company.

Rubfila has been on a steady growth path and has worked towards expanding its capacity over the last 8 years.

The numbers bear evidence that the demand for latex products have been on the rise both domestically and worldwide. This is enough to secure a place for Rubfila International as a debt free penny stock to watch out for in 2023.

Rubfila International Financial Snapshot

Year 2018 2019 2020 2021 2022
Sales Growth (%) 22.0 -0.5 6.5 18.6 54.3
Profit Growth (%) 68.3 -19.3 -11.6 101.2 42.3
ROE (%) 21.9 14.0 10.6 17.6 20.4
ROCE (%) 33.4 19.0 14.0 23.3 27.4
Data Source: Ace Equity

Shares of the company have been on a downtrend, ever since hitting a high of Rs 125 in January 2022.

chart

#4 AVT Natural Products

Fourth on this list is AVT Natural.

The company is engaged in the production and marketing of plant-based extracts and solutions for the food, feed and nutraceuticals industries.

The group has diversified business interests across agricultural commodities, tea, solvent extraction, leather, rubber and spices, etc.

AVT Natural's dividend history dates back to 1997 when the company declared a dividend of Rs 1 per share.

AVT Natural Dividend History

Year Ending Dividend Per Share (Rs) Dividend Payout (%)
Interim Dividend for 2023 0.4 -
31-Mar-22 1.0 20.9
31-Mar-21 0.7 23.5
31-Mar-20 0.6 26.9
31-Mar-19 0.4 29.2
31-Mar-18 0.4 25.2
31-Mar-17 0.4 24.9
31-Mar-16 0.4 28.2
31-Mar-15 0.5 28.9
31-Mar-14 0.8 27.1
31-Mar-13 1.3 19.9
Data Source: Ace Equity

The company's long-term agreements with key customers and its diversified product portfolio has resulted in strong growth in recent years.

AVT Natural Financial Snapshot

Year 2018 2019 2020 2021 2022
Sales Growth (%) 5.4 3.4 16.9 22.4 15.3
Profit Growth (%) -1.0 -13.9 63.1 33.2 60.9
ROE (%) 10.5 8.5 12.9 15.5 21.5
ROCE (%) 14.9 11.5 15.5 19.1 27.0
Data Source: Ace Equity

In the past five years, shares of the company have gained 137%.

chart

#5 BN Rathi Securities

Fifth company on this list is BN Rathi Securities.

The company is in the business of broking in securities and also deals in depository operations and institutional equities.

BN Rathi has a strong track record of paying dividends with good yields.

BN Rathi Dividend History

Year Ending Dividend Per Share (Rs) Dividend Yield (%) Dividend Payout (%)
31-Mar-22 1.0 3.0 16.8
31-Mar-21 1.2 4.9 16.6
31-Mar-20 1.0 9.0 29.6
31-Mar-19 1.0 4.2 40.8
31-Mar-18 1.2 3.2 22.3
31-Mar-17 1.0 3.8 19.9
31-Mar-16 0.8 4.7 20.6
31-Mar-15 1.5 5.4 22.7
31-Mar-14 1.2 8.3 40.1
31-Mar-13 1.0 7.5 33.6
Data Source: Ace Equity

The above table is evident that BN Rathi has maintained a healthy dividend payout over the years. This, on the back of reducing debt. BN Rathi is almost debt free.

The company's business has expanded in the past three years on the back of addition of new demat accounts.

BN Rathi Financial Snapshot

Year 2018 2019 2020 2021 2022
Sales Growth (%) 4.3 -6.1 -8.0 25.6 29.8
Profit Growth (%) 7.3 -54.5 37.7 113.7 37.7
ROE (%) 14.1 6.0 8.1 15.8 16.3
ROCE (%) 21.3 11.5 13.5 22.9 22.8
Data Source: Ace Equity

In 2022, the company set up two new business verticals - Merchant Banking and Alternate Investment Fund, to diversify its revenue stream.

In the past five years, shares of the company have gained 15%.

chart

#6 Shree Digvijay Cement

Last on this list is Shree Digvijay Cement.

The company primarily sells its cement in the state of Gujarat through a network of 1,000+ channel partners and dealers.

Relatively new when it comes to dividends, the cement company has already paid out an interim dividend for this year.

Shree Digvijay Dividend History

Year Ending Dividend Per Share (Rs) Dividend Payout (%)
Interim Dividend for 2023 1.5 -
31-Mar-22 3.5 37.6
31-Mar-21 2.5 65.9
31-Mar-20 1.5 26.9
Data Source: Ace Equity

After reporting losses in fiscal 2017, the company has reported back to back profits for the past four years.

Recently, the company signed a hybrid power contract for hybrid wind and solar power with Continuum Energy.

Shree Digvijay Financial Snapshot

Year 2018 2019 2020 2021 2022
Sales Growth (%) 31.3 5.6 7.7 7.0 25.2
Profit Growth (%) 247.8 -84.6 2638.2 -4.3 2.4
ROE (%) 6.3 0.9 22.8 18.4 17.8
ROCE (%) 11.5 2.9 29.2 28.8 28.8
Data Source: Ace Equity

In the past five years, shares of the company have delivered multibagger returns of 170%.

chart

So there you go...a list of debt free penny stocks which have declared consistent dividends and also registered growth in sales and profits.

Investors who are new to the market usually get lured into investing in penny stocks.

While they do offer the potential for quick returns, you must not forget that penny stocks can be very risky.

A great way is to invest only 5-7% of your total equity portfolio in penny stocks. Doing this will minimise your exposure, lowering your risk.

In the end, it all boils down to one thing, research. If you conduct independent research and follow sensible investing principles, you may spot the next multibagger stock for your portfolio.

Before you dip your toes in the world of penny stock investing, check out the below video where Co-head of Research at Equitymaster Rahul Shah discusses 3 low-risk penny stocks for 2023.

Happy Investing!

Also check out the below list of zero debt penny stocks, which we highlighted in early 2022.

Zero Debt Penny Stocks of 2022

Are you one of those brave souls looking for opportunity in times of adversity in the penny stock space during the current market crash?

If yes, then let us inform you head on...making money from penny stocks won't be easy for the next couple of months.

As the easy money era comes to an end and central banks across the globe raise interest rates, the liquidity driven penny stocks will witness a serious correction if things take a turn for the worse.

That is why, during uncertainty, your job is to sit on the penny stocks which have a decent track record, pay regular dividends, and have low or zero debt.

  • Solid track record because these penny stocks will have a lot to back them. Their upsides depend more on how they execute their strategy in the future.
  • Dividend paying penny stocks because your portfolio will have some cushion from the yields they provide.
  • And debt free because higher interest rates can just as easily bring down the high debt companies.

This way, when the storm hits and hits hard (as and IF the market crashes), you will have a good night's sleep as you already built a sturdy boat.

Penny Stocks with Solid Growth and Zero Debt

Bull market or bear market, regardless of what cycle we're in, people are always on the lookout for 'cheap' penny stocks to buy.

After all, who doesn't love to buy a stock as cheap as under Rs 50 and sell when it doubles or triples wealth.

Penny stocks which have a decent balance sheet, low or zero debt and a track record for paying dividend can fare much better against their peers.

Such companies deserve to be a part of your watchlist.

Let's take a look at the top six penny stocks which fulfill all the criteria mentioned above.

#1 NBCC (India) Ltd.

NBCC (India) operates into three major segments - project management consultancy, real estate, and engineering procurement & construction.

It's a PSU with government of India holding 61.75% stake as of June 2021.

NBCC, which has a wide footprint in civil construction, residential & commercial projects including redevelopment of government colonies, had reported a 237% YoY increase in net profit in the June 2021 quarter.

The company has had nil or almost zero debt over the past 13 years.

Debt free companies always make for a good investment and NBCC India with zero debt gives more comfort to shareholders as it also has solid sales and profit track record.

The company's sales grew at a CAGR of 12% between fiscal 2014 and fiscal 2020. The company's profits have stayed at almost the same level.

(Rs m) Net Sales Net Profit
FY14 40,701.01 2,574.53
FY15 43,998.49 2,782.77
FY16 58,263.77 2,892.98
FY17 74,246.56 3,547.16
FY18 84,470.87 3,782.91
FY19 99,429.74 3,751.60
FY20 80,870.74 782.34
FY21 68,320.65 2,218.00
Data Source: Ace Equity

NBCC India has a solid track record for consistently paying dividends since 2007.

Latest developments suggest that the company will likely feature on the initial list of firms for privatisation, as the government embarks on the path of privatising or closing down all CPSEs in the 'non-strategic sectors' in a phased manner.

Over the past one year, shares of the company have gained 103%.

To know more, check out the NBCC company fact sheet and quarterly results.

Update: NBCC India is yet to declare the dividend for financial year 2021-22. The company's debt levels still stand at zero.

NBCC's net sales for entire financial year increased from Rs 68,320.7 m to Rs 75,748 m while its net profit remained unchanged at Rs 2,379 m.

#2 GMDC

Another on this list is also a PSU - GMDC.

Gujarat Mineral Development Corporation (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.

GMDC's profits have declined over the years but it has maintained consistency. It has never reported losses for any financial year starting back from 2001, barring the latest fiscal.

Have a look at the table below to see the company's financial performance for the past 5 years.

(Rs m) FY17 FY18 FY19 FY20 FY21
Net sales 15,367 20,509 18,797 15,209 13,392
Sales growth (%) 30.4% 33.5% -8.3% -19.1% -11.9%
Operating profit 5,999 6,706 7,006 3,539 1,432
Operating profit margin (%) 39.0% 32.7% 37.3% 23.3% 10.7%
Net profit 3,255 4,276 2,197 2,021 -393
Net profit margin (%) 21.2% 20.8% 11.7% 13.3% -2.9%
Data Source: Ace Equity

Coming to dividends, GMDC has paid hefty dividends since 1997, dividend yield for which has always stayed at or above 1%.

Over the past 12 months, shares of the company have gained 77%.

The company currently trades at an attractive price to book value of 0.6.

To know more, check out GMDC's dividend payout history.

Update: When we wrote about GMDC in October last year, the stock was categorized as a penny stock (trading between Rs 0 to Rs 100) but what followed was a boom in commodities which sent the stock soaring.

It made a top of Rs 228 in April 2022 but came crashing down to Rs 130 levels in the following months.

The company's management has increased focus on how to boost volumes in the coming years and improve GMDC's non-lignite operations.

The company has not yet declared any dividend for financial year 2021-22. It can announce in the coming days as GMDC's MD had expressed interest in rewarding shareholders by dividend payouts versus a buyback.

GMDC's performance for this year was exceptional. Revenues more than doubled while net profit soared to Rs 4,035 m.

#3 Indraprastha Medical

Indraprastha Medical has had debt for every year since 2002. It was until this year that the company was able to bring down its debt to zero.

The company has never reported a loss starting fiscal 2002. Although its latest fiscal bottomline was drastically affected.

Indraprastha Medical's dividend payout history is so attractive that the dividend yield has stayed above 3% since 2001.

The company has paid out hefty dividends till fiscal 2019. It has not paid out dividend for the latest two fiscals.

Year Dividend per Share(Rs) Dividend Yield %
31-Mar-19 1.6 4.17
31-Mar-18 1.5 3.11
31-Mar-17 1.8 3.39
31-Mar-16 1.8 3.46
31-Mar-15 1.8 3.24
31-Mar-14 1.8 4.63
31-Mar-13 1.6 4.89
31-Mar-12 1.6 4.53
31-Mar-11 1.6 4.71
31-Mar-10 1.6 3.53
31-Mar-09 1.5 5.37
Data Source: Ace Equity

Over the past one year, shares of the company have gained 59%.

To know more, check out Indraprastha Medical company fact sheet and quarterly results.

Update: The company has declared a dividend of Rs 2.50 per share for the financial year 2021-22. At the current price of Rs 55, this results in a dividend yield of 5%.

#4 NALCO

Another PSU on the list - National Aluminum Company (NALCO).

Nalco's dividend history goes back to 1995. The government owned company has maintained its dividend payout consistency by declaring dividends throughout all these years.

The company has almost nil debt. Its debt to equity ratios has stayed nil or 0.01% throughout the years.

Coming to sales and profits, have a look at the table below to see Nalco's financials over the years.

(Rs m) FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net sales 73,828 68,170 75,430 95,095 114,993 84,718 89,558
Sales growth (%) 8.9% -7.7% 10.7% 26.1% 20.9% -26.3% 5.7%
Operating profit 25,455 15,646 14,879 16,971 32,184 7,618 19,294
Operating profit margin (%) 34.5% 23.0% 19.7% 17.8% 28.0% 9.0% 21.5%
Net profit 13,219 7,872 6,677 13,422 17,337 1,362 12,994
Net profit margin (%) 17.9% 11.5% 8.9% 14.1% 15.1% 1.6% 14.5%
Data Source: Ace Equity

Last month, shares of the company surged to 10-year highs due to a military coup and political unrest in Guinea, a major supplier of bauxite.

The political instability in the African nation has fueled supply concerns for the raw material used in production of the metal, which could hike aluminium prices, which will in turn benefit NALCO.

nalco

This month, the company announced a final dividend of Rs 1 per share, in addition to the 1st and 2nd interim dividend of Rs 2.50 per share.

To know more, check out NALCO dividend payout history.

Update: For the financial year 2021-22, NALCO has already declared two interim dividends worth Rs 2 and Rs 3.

NALCO's financial performance has been stellar this year, as is the case with most metal stocks.

The company's net profit more than doubled to Rs 29,520 m as compared to Rs 12,995 m last year.

#5 Geojit Financial Services

Geojit Financial share price has had a great run with the stock price of Kochi-headquartered broking-cum-financial services company increasing 107% in the last 12 months.

Geojit Financial is engaged in the business of financial services activities.

From sales of Rs 389 m back in 2004, the company reports on an average over Rs 2,500 m in sales for the past eleven years.

For fiscal 2021, it reported sales of Rs 4,250 m.

Its profit record is much better. Since 2004, Geojit Financial has only reported loss in one fiscal (2014). Its latest fiscal net profit stood at Rs 1,232 m.

Its dividend payout history goes back to 1998.

For fiscal 2021, the company has reported a dividend of Rs 350%, which amount to Rs 3.50 per share, giving a dividend yield of 7%.

To know more, check out Geojit Financial company fact sheet and quarterly results.

Update: Geojit Financial Services has declared a final dividend of Rs 3 for financial year 2021-22. At the current price, this amounts to a dividend yield of 6%.

The record date for this dividend is 4 July 2022.

#6 Jullundur Motor Agency

Jullundur Motor Agency is engaged predominantly in trading and distribution of automobile parts, accessories and petroleum products primarily in India.

The company has decent sales and profit growth track record.

(Rs m) Net Sales Net Profit
FY15 4,094.21 154.5
FY16 4,151.20 133.71
FY17 3,874.19 136.89
FY18 3,271.68 127.64
FY19 3,557.64 159.57
FY20 3,619.29 140.14
FY21 3,870.00 230.1
Data Source: Ace Equity

Over the past one year, shares of the company have rallied 135%.

Now, there are several positive factors which has supported this stock.

First one being that the company is debt free. Jullundur Motor Agency has maintained its 'no debt company' status over the years.

Second positive is that it has good dividend payout track record. At the current price, the company is offering a dividend yield of 3.3%, which is more than decent.

The third factor being that the stock is trading at 0.86 times its book value, which makes it attractive.

The price to book value ratio compares the market and book value of the company. The higher the price to book value, the more expensive the stock.

An interesting data here is that FPIs, DIIs, and promoters, all of them are raising their shareholding in this company.

How should one go about investing in penny stocks?

One should always do their own research before investing in penny stocks as they are inherently riskier than blue-chip or mid cap stocks.

On the brighter side, they present a huge growth potential. It's not unusual for a good penny stock to turn a multibagger in a matter of months. But on the flipside, there is a high risk attached.

Not all penny stocks tend to be outperformers. That is the reason penny stocks are not recommended to those having a low risk profile.

The corpus that one sets aside for penny stocks should not be more than 5%-7% of the total money allocated towards equities.

You need a very strong framework to separate men from the boys in penny stocks. A framework that not only enables you to zero in on the right penny stock at the right price but also helps you avoid those big losers.

Back in July 2020, Co-head of Research at Equitymaster, Rahul Shah shared a very effective technique that zeroes in on the right penny stocks.

Since you are interested in penny stocks, check out our ultimate guide to penny stock investing.

Happy Penny Stock 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...

Yash Vora

Yash Vora is a financial writer with the Microcap Millionaires team at Equitymaster. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.

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2 Responses to "6 Penny Stocks with Solid Growth and Zero Debt"

Pradip Kumar Singh

Jul 2, 2022

Excellent research work done by your team..

Like 

Akhilesh kumar

Oct 3, 2021

Excepting good infuture.

Like (2)
  
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