On Tuesday, the stock closed at ₹36.25 apiece down by 0.55%. The company's market cap is around ₹7,256.89 crore. At the current closing price, HUDCO's dividend yield stands at 9.6%.
HUDCO is among the top 10 dividend yield stocks.
According to the HDFC Securities report, HUDCO derives significant strength from majority Government ownership (81.8% stake) and AAA rating which provides comfort to the lenders and aids in reducing the cost of borrowing for the company. It plays an important role as a nodal agency for the implementation of Government policies in the high-priority sectors of social housing and urban infrastructure. Its portfolio is a relatively low-risk profile given the focus on Government-sponsored urban infrastructure and social housing projects.
In over last five decades, HUDCO has sanctioned a total of 17,326 housing and urban infrastructure projects with a cumulative loan component of ₹224,607 crore and disbursement of ₹188,404 crore as of March 31, 2022. Also, the company has sanctioned more than 1.93 crore houses in the country across both rural and urban India.
In the longer term, Atul Karwa Research Analyst at HDFC Securities in its report said, "we expect, demand for housing is likely to increase with the increasing urbanization, better affordability and higher incentives provided by the Govt. This is likely to be beneficial for companies like HUDCO. The Govt. is also looking to improve urban infrastructure and provide better living conditions to the rising urban population. HUDCO has restricted its fresh exposure to the private sector since 2013. Legacy private sector loans accounted for only ~3% of the total loan book as of Mar’22."
Further, the analyst's note said, "We expect the loan book of the company to grow at a conservative CAGR of ~8.5% over FY22-FY24E. PAT is expected to grow at 6% CAGR on account of higher base due to exceptional items, stable spreads, and higher delinquencies. FY22 profit was aided by provision write-back of ₹246 crore lifting RoA to 2.2%."
Additionally, the note added, "the benefit of writeback might not be available in the coming years and we expect RoA to hover around the 2% mark. Most of the concerns seem to be reflected in the price and the stock is available at an inexpensive valuation and offers an attractive dividend yield."
In FY22, HUDCO paid a total dividend of ₹3.5 per equity share aggregating to 35% to shareholders. HUDCO's dividend yield in FY22 stood at 8.5%. In FY21, the company paid a dividend of ₹2.2 per share.
The dividend yield of a stock is a ratio of dividends paid per equity share to shareholders on the current price of the equity share. Stocks with high dividend yield compared to benchmarks like Sensex and Nifty 50 are referred to as high dividend yield stocks. The high dividend yield also gives a fair understanding of the share's price value.
HUDCO's dividend yield has consistently risen as currently taking into consideration the current price on BSE, the yield has jumped to 9.6% in the latest fiscal as of now -- compared to the FY22 print.
HDFC Securities analyst believes investors can buy the stock in the band of ₹36-36.5 (0.44x FY24E ABV) and add further in the ₹32.5-33 band (0.4x FY24E ABV) for a base case fair value of ₹40 (0.49x FY24E ABV) and bull case fair value of ₹43 (0.53x FY24E ABV) in the next 2-3 quarters.
HUDCO shares were less than ₹19 when the first wave of the pandemic led to a nationwide lockdown effective on March 25, 2020. Since then, the shares have climbed by a whopping over 91%.
HUDCO focuses on providing long-term finance for the construction of houses for residential purposes or finance or undertaking housing and urban development programmes in the country. It also finances infrastructure projects.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
