Dividend yields are once again driving investors to pick up stocks lying low, including those below par. Standard Industries and Ashok Alco-Chem are among those which are being picked up by investors to reap dividends.An yield in excess of 30 per cent has perked up the Standard Industries' scrip on the Mumbai Stock Exchange. On February 9, the scrip touched a 52-week low of Rs 3.20, but after the company declared a 10 per cent dividend (for the year ended September 30, 1997) the scrip shot up to Rs 4.40 in just nine trading sessions. Daily volumes have also improved; from the previous range-bound volumes of 700-1000 shares, the counter now sees around 50,000-60,000 shares change hands every day.
Ashok Alco-Chem, too, has risen on BSE from Rs 17.35 to Rs 19 in seven trading sessions accompanied by good volumes. The reason for the buying interest in the counter is attributed to the attractive dividend yield of over 16 per cent. As this is is the yield on the interim dividend of 30 per cent, investors arehopeful of a better yield for the full year. This is probably why the scrip is till rising even after the record date is over.
Standard Industries turned around with a net profit of Rs 3.05 crore compared with a loss of Rs 5.18 crore in the previous fiscal. Although total income in fiscal 1997 was down 4 per cent to Rs 468.5 crore, the company's bottomline improved due to the cost-cutting drive initiated by the company. Apart from curtailing expenditure, interest cost was also brought under control. While total expenditure declined by Rs 23.76 crore to Rs 426.7 crore, interest outgo at Rs 23.19 crore was down by almost 10 per cent over the previous year. On an equity base of Rs 39.33 crore, the current EPS works out to to 78 paise.
The company had a dividend-paying record for four consecutive years till it went into the red in 1996. Now, that it has turned around, a dividend of 10 per cent has been declared. The company has two divisions - textiles and chemicals. While the former manufactures fabrics,garments and yarn, the latter manufactures bulk inorganic chemicals like caustic soda, chlorine etc. According to company officials, the textiles division will fare better this year while the chemicals division can face some problems.
As traders are delaying their payments to the company, interest cost is likely to go up during 1997-98. A clear picture would emerge only after elections are over and the new government is formed at the Centre, the officials added.
Like Standard Industries, Ashok Alco-Chem has a history of high dividend payouts. According to company officials, the performance for the current fiscal will be in line with the past financials and, hence, investors can expect a higher dividend payout compared with 35 per cent for fiscal 1996-97.Ashok Alco-chem, which manufactures acetic acid and alcohol, has recently embarked on a capacity expansion. It is also adding a new product -- ester of acetic acid -- to its list of products. While manufacturing capacity of alcohol will go up by 33 percent from the current 1 crore litres, that of acetic acid will be enhanced by 45-50 per cent from the present 9,000 metric tonnes. The expansion project, which will be completed within the next two months, is expected to double the company's turnover. However, benefits of adding new capacities will accrue only in the next fiscal.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
