10,150% Dividend In FY23: At 36.6% Dividend Yield, This Metal Stock Has Potential For 12-35% Upside Ahead
Billionaire Anil Agarwal-backed Vedanta is the highest-paying dividend stock in large-cap space with a dividend yield of a whopping 36.56%.This mining company has a strong track record of paying hefty dividends consistently.In FY23, it paid a breathtaking 10,150% dividend.Not just that, Vedanta also declared a huge 1850% interim dividend in Q1 of FY24 despite posting a decline in profitability.Although Vedanta’s stock has seen volatile performance in 2023, the stock is seen to rise between 18% to 35%.
At the time of writing, Vedanta’s share price traded at Rs 278.75 apiece, up by 0.54% on BSE.The stock gained by nearly a per cent with an intraday high of Rs 279.35 apiece.In 5 trading sessions, the stock advanced by nearly 2%.
However, year-to-date, Vedanta’s stock dipped by nearly 12% on BSE.
But its yearly gains are around 13.5%.
In Q1 of FY24, Vedanta posted a 40% YoY decline in consolidated net profit to Rs 2,640 crore, while revenue from operations also dipped by 13% YoY to Rs 33,342 croreIn the quarter, the company also paid an interim dividend of Rs 18.5 per share or 1850%, reinforcing its commitment to positively impacting the nation and creating value for its shareholders.
In the financial year FY23, the company paid a total dividend of a whopping 10150% or Rs 101.5 per share.
Currently, Vedanta holds a dividend yield of 36.56%, making it the highest dividend-paying stock in the large-cap category.
According to Systematix’s research report, Vedanta posted weak performance across segments despite higher volumes, the impact of which was offset by lower commodity prices.Aluminium/Oil & Gas/ Zinc International segment EBITDA fell 17%/45%/52% YoY due to low aluminium, zinc, and oil prices.
Among key businesses, aluminium production grew 2% YoY to 579 kt, while the cost of production fell 27% YoY.
The brokerage highlighted that the FY23 dividend payout of Rs 299 billion helped reduce debt at parent Vedanta Resources (VRL) by $2 billion.
However, Systematix’s analysts believe that elevated dividend is likely to be a drain on cash and lead to rising levels of debt already seen in the last two quarters.Net debt increased by Rs 139 billion during the quarter due to sustaining capex and dividend payout, resulting in a deterioration in the net debt/EBITDA ratio to 1.88x from 1.28x as of Mar’23.
Following this, Systematix downgraded its rating to ‘Hold’ on Vedanta for a target price of Rs 311 —which is a 12% upside from the current market price.
It said, ” We adjust our FY24E/25E EBITDA by -23%/-24% respectively to reflect adjustments to our annual commodity price and cost assumptions.We value VEDL at 4.5x FY25E EV/EBITDA, with a revised target price of Rs 311/share (Rs 501 earlier).Downgrade to HOLD.Over the near term, a) aluminium business volume ramp up by >35%, b) alumina capacity ramp up by >150%, c) captive coal mining >30mt (100% captivity), d) >100% increase in iron ore mining through new mines in Goa, Odisha, andLiberia, and e) higher output at FACOR, are positive for VEDL.However, significant correction in commodity prices which are largely driven by macro factors weighs on the outlook.Adverse commodity price swings due to aggressive rate tightening and its impact on demand pose key risks.”
On the other hand, Antique Stock Broking analysts in their report said, “Benefits from most of the company’s cost optimizing initiatives are expected to accrue only from 2HFY24 onwards.Hence, short-term subdued commodity prices might impact profitability.Lowering CoP for most metals and a better sales mix would enhance profitability.Higher FY24 capex guidance of USD 1.7 bn might limit dividend payout.
We incorporate lower metal and commodity prices and maintain BUY rating at a revised TP of INR 329 with an implied FY25 EV/ EBITDA multiple of 4.1x.” This would be an 18% potential upside in Vedanta shares against the current price level.
The latest to recommend buying in Vedanta would be Equity99As per the Economic Times report, Equity99 has a buy call on Vedanta with a target price of Rs 375.If that is the case, then Vedanta shares have the potential to rise by at least 36% from the current price.