Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tata Steel: Taking cues from dividend yield - Views on News from Equitymaster
  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Tata Steel: Taking cues from dividend yield
Nov 10, 2008

Backed by 101 glorious years of experience in steel making, Tata Steel is world's 6th and India's largest private sector steel company with a capacity of 30 m tonnes. It is among the lowest cost producers of steel in the world. It is world's second most geographically diversified steel producer, with operations in 26 countries and commercial presence in over 50 countries. Through the acquisitions of Corus, Millennium Steel (renamed Tata Steel Thailand) and NatSteel Asia, Singapore, Tata Steel has created a manufacturing and marketing network in Europe, South East Asia and the Pacific-rim countries.

The company has been continuously paying dividends to its shareholders since the last 47 years and is among one of the very few Indian companies with such an amazing track record of dividend payout. Hence, given this long history, there are very little chances that the company might stop paying dividends to its shareholders in the future.

It should be noted that the stock has corrected nearly 80% from its all time high of Rs 992 per share. Infact, at the current price of Rs 200 or thereabouts, the stock is trading at a mouth-watering dividend yield of around 8%. The last time the stock traded at such an attractive dividend yield was way back in FY02, when investors were predicting a gloomy future for the company just as they are doing now. Back then, the company had touched a low of Rs 67 per share, indicating a dividend yield of a little more than 7%. If one had bought shares in the company at that depressed price and had reinvested the entire dividend proceeds back into the company at an average price for that year, then even at current prices, where the company is trading at 80% off its all time highs, the compounded growth rate would have amounted to a very sound 21%. Had the investor managed to sell all his shares at the all time highs of Rs 992 per share, his returns would have grown at an astonishing CAGR of 52%. However, we would like to add that this would have amounted to timing one's entry and exit to perfection and this is a very difficult task even for the most seasoned investors, let alone a lay investor.

Would investing in the company at current levels lead to similar returns in the future? This would be the question that would be uppermost in every investor's mind right now. Well, since dividend payouts depend upon the profitability and the capex needs of the company in the future, estimation of future dividends need to take into account these two important variables in mind. Once again, a peep into the past may provide some guidelines. Since the company may have undertaken capex plans and steel prices would have fluctuated in the past as well, did this force the company to cut its dividends significantly? Since FY91, there have been only two instances where the company has been forced to cut its dividends. The cut had been of the magnitude of 30% on one occasion and 20% on the other occasion. Barring these two instances, the company has never cut its dividend per share since 1991. However, it should be added that on quite a few occasions, it has kept its DPS constant.

We would like to conclude that a company does not operate in a vacuum. The environment keeps on changing. But does it change so much so as to warrant the kind of thrashing it has received in the past few months. The answer is for the investor to find out.

Equitymaster requests your view! Post a comment on "Tata Steel: Taking cues from dividend yield". Click here!


More Views on News

Tata Steel: India and SEA Shine; Europe Whines (Quarterly Results Update - Detailed)

Nov 3, 2017

India and South East Asia Business reported a good performance on the back of strong volume growth. European business witnessed pressure at EBITDA level due to narrower spread.

Tata Steel: A Strong Quarter (Quarterly Results Update - Detailed)

Aug 12, 2017

Tata Steel reported a robust operating performance on the back of strong domestic and European operations.

Tata Steel: Strong Quarterly Performance (Quarterly Results Update - Detailed)

May 22, 2017

Tata Steel reported a robust operating performance on the back of strong domestic and European operations.

SAIL: Operating Margins Offer Hope; Bottomline Languishes in Red (Quarterly Results Update - Detailed)

Nov 21, 2017

The company registered good performance at the operating level and reported a positive EBITDA of Rs 9.1 billion during the quarter. However, bleeding continued at PAT level.

SAIL: Bleeding Continues at EBITDA Level... (Quarterly Results Update - Detailed)

Aug 28, 2017

The company registered a negative EBITDA of Rs 839 million during the quarter. This is on the back of an increase in raw material prices.

More Views on News

Most Popular

Here's What You Should Do in this Market Crash(The 5 Minute Wrapup)

Feb 6, 2018

The market correction has provided a golden opportunity to buy five high-quality safe stocks.

The Era of Easy Money is Coming to an End. What Happens Now?(Vivek Kaul's Diary)

Feb 9, 2018

The easy money policy of the Federal Reserve of the United States, which drove up stock markets all over the world, is ending, with the Federal Reserve looking to shrink its balance sheet.

The Markets Want Your Money. Don't Give It to Them.(Smart Contrarian)

Feb 9, 2018

MFs are having a gala time taking money from over-eager investors and funneling it into equities. Smart investors, though, know better than to do that.

The Big Gamble(The Honest Truth)

Feb 15, 2018

Once you accept the fact that elections are round the corner and that this budget is geared to reach a 40% target, everything makes sense.

When Small is Not Always Beautiful(Chart Of The Day)

Feb 6, 2018

Big companies enjoying tax deductions and exemptions have an edge over the small companies.


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Feb 19, 2018 (Close)


  • Track your investment in TATA STEEL with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks