Dividend payout boosts CIL stock

However, analysts are worried about stock performance

The dividend announcement by Coal India (CIL) may have impressed investors but market analysts remain concerned about stock performance.

Investors on Wednesday stocked up on shares of CIL after the company announced a dividend payout of Rs 29 per share, pushing the scrip up by 1.8% to trade at Rs 295.10. However, market analysts believe that the stock is a little too expensive at this point for investors to buy in.

“The stock has run-up already since last Monday as the news of the dividend payout had been expected. So to that extent, some of the good news has already been discounted for in the stock price,” said Saurabh Agrawal, deputy vice president (research), Kotak Securities adding that investors should buy on a decline to levels lower than Rs 285 per share. “Otherwise we feel it’s too late,” he said.

Some brokerage firms have, despite the dividend payout, even maintained a sell call on the stock.

“Although the higher dividend is positive for minority shareholders, it is likely to be a one-time event in the backdrop of the dire financial situation of the government. We have retained our Sell rating on CIL as we believe it will again go back to 50% dividend payout as against 119% declared so far in FY14, based on our earnings estimate,” said a note on CIL by Nirmal Bang Institutional Equities Research authored by analyst Giriraj Daga.    

Besides, analysts said that earnings could continue to remain under pressure as the company is unable to pass on the rising costs to consumers.

On Wendesday, the BSE Sensex was trading up 0.9% at 21,221 while the NSE Nifty was trading at 0.9% at 6,297.