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Ex-dividend days of companies, in general, see a lot of selling activities amid free fall of stock concerned which is normally equivalent to the dividend yield. However, Coal India seems to have emerged as an exception despite seeing one-tenth value erosion last Friday.
Nearly 10% decline in Coal India's shares, as it went ex-dividend on Friday, has not deterred investors from pumping in money in the counter. On a day when sellers were eligible to pocket the heavy special dividend and buyers lost out to earn that extra tax-free income, the counter managed to see almost half of the traded shares getting into the delivery settlement.
Such a high percentage of delivery-based trading on an ex-dividend day, in itself, is remarkable given a massive outgo of over Rs 18,000 crore as dividend from the coal giant's cash surplus account to investors. Of which, 90% will straight away go the the government.
Rikesh Parikh, vice president(market strategy) at Motilal Oswal Financial Services, says, "One major reason remains the tax-free dividends. However, from a long-term perspective too investors took interest in buying the counter as the company has huge potential as it can generate cash flows and capital requirement. Moreover, since the overhang of OFS has gone now, there were investors waiting to enter at sub-Rs 300 levels. With the kind of infrastructure growth requirement for the country, I see no negatives in the counter from a long-term perspective."
On its ex-dividend day, the stock closed at Rs 272, down 10.13% or Rs 30.65 on the NSE; while on Monday it slipped further to close at Rs 269.55.
On January 8, when the company informed exchanges that its board will consider interim dividend, the counter saw nearly 43% of delivery based trading which only picked up in the following trading sessions. It touched a high of 73%, a day before the company announced a fat dividend of Rs 29 per share post market hours on January 14. This translated into a 10% dividend yield, a rare quick return on investments.
Interestingly, delivery percentage on ex-dividend date was higher than the day dividend amount was announced. Markets were abuzz with expectations of special dividends since December from Coal India. And it was well reflected from the higher percentage of deliveries investors were booking since the since the start of this year.
Sudip Bandyopadhyay, President, Destimoney Securities, says, "Investors were more inclined for dividend stripping on the counter. Though, there is no immediate excitement post dividend, there is potential in the company from the India's infrastructure growth point of view."
However, continuation of higher delivery-based trading even on a day when buyers would not be entitled for dividends suggest that most investors expect the counter to gain from here on. On NSE, 47.67% of the traded quantity of Coal India's shares were delivery-based while on the BSE it stood at 78.62%.
It appears that some of brokerages' upbeat calls on the counter, despite the one time special dividend, have boosted investors' sentiments.
Macquarie, for instance, is positive on the stock and has maintained an outperforming rating on Coal India while according to Deutsche Bank the stock looks attractive from the valuation perspective. Some of the technical analysts have not ruled out the possibility of the counter reaching a levels of Rs 310-315 in next 8-10 trading sessions.
Emkay, a Mumbai-based brokerage firm, in its report dated 18 December had recommended investors to hold Coal India with a target of Rs 317.
The record date for the payment of dividend is 20 January and the same will be credited to investors' accounts on and from 25 January.
