The market meltdown has presented good options to buy into stock that have a good growth story, are relatively cheap and are projected to have strong dividend yields for Fy10-11
1. Indiabulls Finance (CMP 143, PE of 8.4) compares very favourably with peers and has reoreinted its business model to focus on housing finance , a key growth area. Indiabulls Finance has a price/book of 1.1, growth of 20-25% and dividend yield of 3.4%. LIC Housing has price/book of 2.75 and a yield of 1.5%. HDFC has a growth projection of 20-25% ,a price/book of 6.5 & and yield of 1.1%.
The projected yield of Indiabulls at CMP will be 6%
2. In infrastructure finance SREI is a good bet , not keeping in mind Jhunjhunwala’s fancy to the stock. The budget has also increased focus on infrastructure. SREI Infra (CMP 43.5, PE 6) has price/book of 1.1 , Yield of 2.75% . IDFC has a PE of 17, Yield of 1%, Price/Book of 2.2 .
The projected yield of SREI is likely to be 4%
3. Satluj Jal Vidyut Nigam a relatively secure hydropower play, likely to see good growth action from 2013 onwards, is also available at a yield of around 4%, projected to be 4.5%.
Note : Projected yield is based on the following methodology. Companies have been filtered based on achievement of at least 75% of FY10 profits in the nine months ended December 2010 and assumed that the companies would maintain their FY10 dividend payout ratio. We have forecasted the FY11E PAT by taking the actual PAT of nine months ended December 2010 and assumed Q4FY11 as an average of last three quarters net profit.
Gold Bird 