Coal India Shares: Low On Dividends Despite High Profits

Mumbai: Even as dividends have been Coal India Ltd's forte in the past, this year it has not been one of the state-run miner's best for investors on this matter. The coal producer declared interim dividends of Rs 5.85 per share, announced last week, which are lower than the Street's expectations. With this, Coal India's cumulative dividend so far for this financial year stands at Rs 13.1 per share. The miner's dividend stood at Rs 16.5 and Rs 19.9 per share, for FY18 and FY17 respectively.

"Year to fiscal year 2019 payout of 54 percent (of net profits) is far lower than that for the past three years when the payout exceeded 125 percent on every instance," said analysts from Edelweiss Securities Ltd in a report on 15 March.

While payouts are lower, profits are relatively higher

Profits are relatively higher in a year when payouts are lower. The company is estimated to record a consolidated net profit of Rs 16,416 crore, according to media reports. This is more than double the FY18 profit. "If such a turnaround was witnessed in profits of a private sector company, you would have seen the stock fly high," an analyst said.

Coal India's annual capital expenditure (capex) requirement of Rs 12,000–15,000 crore to continue 5 percent volume growth is expected to keep dividend yield muted hereon, according to Edelweiss. Analysts are not thrilled at the prospects of the growth either.

"Year to fiscal year 2019 payout of 54 percent (of net profits) is far lower than that for the past three years when the payout exceeded 125 percent on every instance,"

"The benefits due to capex are not obvious as the incremental profit due to increased production is at best enough to cover cost inflation," said analysts from HDFC Securities Institutional Research in a report on the miner in December.

Investors would thus be disappointed unless Coal India makes up by paying a final dividend later. Since the company began making large payouts in FY14, dividends have always been announced before the financial year ends.