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Today is the 4th straight session when the broader markets are plunging as the Covid-19 fear isn’t looking to fade anytime soon. The index is trading 0.96% down at 17,953, by 11:09 AM IST, breaking below the 18,000 mark for the first time after 10 November 2022. The ongoing correction in the index is nothing compared to the massive liquidation that is going on in the small-cap and mid-cap space.
Nonetheless, dividend lovers are keenly watching their favorite dividend stocks to grab them at lower prices and one counter is Vedanta Limited (NS:), which is a diversified natural resources company, having a market capitalization of INR 1,12,029 crores. It is the highest dividend-paying large-cap stock on the NSE, with a current dividend yield of a massive 31.4%. This seems too good to be true. Generally, large-cap companies do not trade at such a high dividend yield, but Vedanta is in its own league.
Image Description: Daily chart of Vedanta with volume bars at the bottom
Image Source: Investing.com
In the last 4 fiscal years, the company declared a total dividend of INR 77.25 per share. The company has a stake in Hindustan Zinc (NS:) as well which is also a high dividend-paying company and Vedanta enjoys a stream of dividend income from there which further gets distributed amongst Vedanta shareholders.
Even from the FY22 perspective, the stock looks quite undervalued, with a P/E ratio of 5.96, compared to the sector’s average of 13.53. Such a low P/E ratio is there, despite a noticeable rise of 62% in net earnings to INR 18,802 crores in FY22, which is the highest on record. No doubt, high metal prices significantly boosted the company’s revenue in FY22, which might not be a scenario in FY23, but the company has a very consistent track record of paying dividends.
Now the main question is what is the ideal level to add this dividend gem to the portfolio? The stock is already down around 5% this week to INR 292, but the fall might continue for some more time. A couple of sessions back, the stock broke below the rising trendline support which is a bearish sign, but a good one for dividend lovers. The nearest support in the vicinity is around INR 275, which is a further 6% cut from the CMP.
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