The “Dividend Yield”, usually expressed as a percentage, is a financial ratio that portrays how much a company pays out in the form of dividends annually relative to its share price.
Listed below is one such high dividend yield stock under the ‘large-cap’ category that one could consider adding to their portfolio for a potential upside of 40 percent:
Oil & Natural Gas Corporation Limited
With a market capitalization of Rs 3.55 lakh crores, the stocks of Oil & Natural Gas Corporation Limited (ONGC) started their trading session on Monday at Rs 267.15 and currently trade at Rs 282.50, gaining approximately 6.50 percent compared to the previous closing levels of Rs 265.65 apiece. The company has a dividend yield of 4.23 percent.
Jefferies, a Multinational Investment Bank and Financial Services Company based in America, initiated coverage on the stocks of ONGC and gave a ‘Buy’ recommendation on the stock with a target price of Rs 390 per share, indicating a potential upside of around 40 percent.
The rationale for providing such an aggressive recommendation pertains to the company’s ability to generate strong free cash flows and reduce its consolidated net debt which would lead to profitable growth over FY24-26.
“In the past, reforms in crude and gas pricing impacted the company’s profitability above past decade averages. Going ahead, we believe that a sharp rise or fall in crude prices could be potential risks for ONGC,” the Brokerage added.
During the recent financial quarters, the company’s prime business parameters, viz, its operating revenues as well as after-tax profits, showed movements in opposing directions.
The former, on one end, increased from Rs 1.47 lakh crores during Q2FY24 to Rs 1.66 lakh crores during Q3FY24, and the latter, on the other end, dipped from Rs 16,553 crores to Rs 10,748 crores.
According to the latest presentations, the company’s capital expenditure (Capex) is expected to be between Rs 33,000 – Rs 35,000 crores for the next two years. It also plans to infuse around Rs 19,000 crores in “ONGC Petro Additions Limited” (OPaL) under government consideration.
In addition, the company also expects an increase of around 15 percent in its production levels over the next three years. It also expects to achieve 5 mln tons of oil & oil equivalent production from new projects in the coming period.
Founded in 1956, Oil & Natural Gas Corporation Limited (ONGC) is a company based in India that operates onshore as well as offshore fields across the globe through numerous partnerships and JVs. Apart from the above, the company also engages in the transportation and refining of ‘Hydrocarbon’ products.
Written by Amit Madnani
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