Hope you are doing good and taking proper precautions as the lock-down is gradually being lifted.
As discussed in our Risk categorization of portfolio stocks update, we are increasingly focusing on leading debt free companies which will probably emerge stronger from this pandemic and capture higher market share in the years to come.
Also, if such companies come with dividend yield as good as 15%, one can only blame himself for not buying such stocks during periods of distress.
Unless, you are from the group that justifies buying high quality low growth stocks at almost any valuation, you may find our latest stock report and the thesis behind the same interesting.
Just to be clear, we are only discussing the thesis because the stock report has been shared only recently with Premium Members and included in the Model Sheet.
Stock Idea (May’20)
The company we are talking about has the following attributes:
- Market cap < 10,000 crore
- Lowest cost producer in its industry in India
- Among the top 3 players in India
- Dividend yield > 15%
- Debt free balance sheet with cash equivalents to the tune of 40% of the market cap of the company
- Cash flows from operations (6 yrs avg.) higher than reported PAT
- Operating business available at ~15% of the replacement cost
- Expanding capacity by 40% through internal accruals
These days there’re a few decent sized debt free companies with dividend yield of 7-8%. Some even offering 15-20% and yet investors are not willing to touch them even with a barge pole.
A few years down the line many might end up substantially higher and would appear no-brainer then.
Get access to May’20 and other reports and Model sheet by selecting Premium Membership