This article will explore five dividend stocks poised for a potential rebound in 2024.
#1 Indraprastha Gas
Topping our list is Indraprastha Gas, a forerunner in the city gas distribution industry in Delhi and its surrounding areas. The company specializes in supplying compressed natural gas and piped natural gas for vehicles, homes and industries.
Its early entry into the market gave it a competitive advantage, securing exclusive rights to marketing and infrastructure in its operational zones.
Indraprastha Gas boasts a consistent dividend history since 2004, with an average dividend payout ratio of 27.6% over the past five years and a current yield of 3.1%.
The stock faced a decline after the Delhi government’s announcement to transition its vehicles to electric within five years, affecting the company’s future revenue and market share.
In response, Indraprastha Gas plans to invest ₹12 billion in expanding its network from 2024 to 2026, financed entirely by internal charges. Collaborations and innovative projects such as the H-CNG station, together with retro-integration strategies such as in-house gas meter production, position the company for revenue and profit growth in the medium term.
#2 UPL
Next is UPL, a global leader in agrochemicals, industrial chemicals and specialty chemicals, as well as seeds. Operating in more than 140 countries, UPL is the fifth largest agrochemical and fourth largest seed company worldwide. Despite a dividend record since 2004, with a five-year average payout of 20.6% and a current yield of 1.9%, its shares have taken a hit due to falling chemical prices and a heavy debt load.
However, UPL’s long-term performance remains strong, with a focus on debt reduction and cost efficiency aimed at boosting financial health.
Debt moderated, and revenue and net profit also grew at a CAGR of 19.5% and 22.9%, respectively. The company aims to reduce its gross debt by $500 million by March 2024.
In addition, the company’s commitment to product diversification promises to improve revenue and profitability, suggesting a recovery on the horizon.
#3 HDFC Bank
HDFC Bank, the largest private sector bank in India, is renowned for its robust balance sheet and minimal non-performing assets (NPAs), or bad loans, ensuring steady dividends even in tough times. Recent pressures on its share price have been attributed to an increased loan-to-deposit ratio and a slight rise in NPAs post-merger.
However, HDFC Bank’s expansion into housing loans and untapped markets post-merger is expected to spur its growth and customer base expansion.
#4 IG Petrochemicals
IG Petrochemicals, a key player in the production of phthalic anhydride (PAN), maleic anhydride and benzoic acid, stands out as the most cost-effective PAN producer in the world. The company has been consistently paying dividends to its shareholders since 2015 with a steady increase in dividend payout.
In the last five years, the average dividend payout was 15.9%, and the current dividend yield is 2%.
Despite a share price drop in September 2023, the company’s expansion plan to increase PAN production capacity significantly by the end of FY24 indicates promising revenue growth potential.
It is also considering manufacturing PAN derivatives that will help improve profit margins.
#5 Sharda Cropchem
Rounding out the list is Sharda Cropchem, known for exporting agrochemicals and various non-agri products through a cost-effective outsourcing model. The company has been paying consistent dividends to its shareholders since 2015 and has a five-year average dividend payout of 18.7%.
After its Q1 results for financial year 2024, the company’s revenue and profit fell in Europe and LATAM regions due to inflation, adverse market conditions and recession.
Therefore, the company’s share price also took a beating and fell almost 18% in the last year.
Despite recent setbacks in Europe and LATAM, continued investments in product development and market expansion strategies are poised to drive future growth, supported by growing global demand for agricultural products.
It also plans to expand its distribution base, enter new markets and focus on cost-cutting initiatives to improve its revenues and margins.
A Financial Snapshot of High Dividend Stocks
Here is a table showing the above companies on various important parameters for easy reference.
These companies have a good chance of rebounding in 2024. They are fundamentally strong and have high growth prospects.
However, it is important that you do your research and due diligence before considering these companies for investment.
Happy Investing!
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com