Stock Views on Ultramarine & Pigments, Paper Products, PSL

PSL

PSL is one of the country's largest pipe manufacturers with a production capacity of one million tonnes. It caters to the demands of the oil & gas and water transportation industries. The company has been a regular dividend payer with a yield of 5.2%. It also has strong cash reserves to fund its expansion plans, if any. The pipes industry has under performed the market in the current fiscal on account of order backlogs due to a slowdown in advanced economies. PSL has also got adversely impacted. Based on its performance so far, the company's FY11 earnings are likely to be lower than FY10. Despite its poor show, one could expect a dividend payout of around 25% of profits.

 

Paper Products

Manufacturer of corrugated cardboard products, Paper Products is the Indian arm of Finland-based Huhtamaki Group, a global packaging company. With negligible debt on its books, the company has been paying dividends consistently. The company follows the calendar year as its financial year and has a history of steadily growing revenues. Its annual revenues dropped for the first time in 2009 although the profits remained unaffected. It has posted a smart recovery in revenues in 2010. The company typically maintains a dividend rate of 90% of equity. 2009 being a platinum jubilee year, the company paid 150% of equity as dividend. If the company reverts to paying dividend at the rate of 90%, it will amount to a payout of 23% of its profits. This is quite likely as the company has paid more than 40% of its profits as dividends.

Ultramarine & Pigments

Ultramarine & Pigments is diversified into sectors such as pigments, surfactants, wind power and IT enabled services. It has a history of healthy operating cashflows, is debt-free and has not missed a dividend in the past two decades. The company's growth has been on a decline for the past four years. Its net profit fell from Rs 20 crore in FY07 to Rs 10.8 crore in FY10. It reduced its normal dividends from Rs 3.5 per share in FY07 to Rs 2 in FY10. A special dividend of Re 1 per share in FY10 meant that the company paid out almost all its profit of that year as dividend. In FY11, the company has recovered substantially to post a 110% profit growth in the first half of the year. This makes a convincing reason that it can sustain its last year's dividend of Rs 3 per share even for FY11. At the current market price of Rs 39.8, this works out to an attractive yield of 7.5%