Dividend Candidate(#1): GMDC🤑

Screenshot 2019-12-10 at 18.26.56

Not a great company; not even average; below average would be apt. Then why start with this? Because the dividends they dole out is quite surprising. Here’s a snapshot from 2015:

Gujarat Mineral Development Company (Ticker NSE: GMDCLTD)

CMP: Rs. 55.35/- (NSE, 10 Dec 2019)

[1]Established in 1963,  it’s a state owned enterprise – 74% stake is held by the promoter – Govt of Gujarat

[2] It is a commodity company, involved in extraction of minerals – lignite (coal) and bauxite (alumina) and power generation

[3]80% of its profit before tax is contributed by the sale of lignite and is the largest merchant seller of lignite in the country

[4] Debt free company

[5] It’s book value is at Rs. 135.76/- per share and it’s current price is 0.41 of it’s book value

[6] Steady dividend percentage at 150% of its face value of Rs.2/-

Sanpshot of GMDC (Source: Company website)
Sanpshot of GMDC (Source: Company website)

Even in a bad year like 2019, the company paid out Rs. 2/- per share as dividend ie 100% of its face value of Rs. 2/-. The dividend is always declared in September each year and paid in October.

Considering it is a cyclical business, the EPS is zig-zagging but the dividend has been steady and that makes it a good dividend candidate. At share price of Rs 55/- considering a dividend of Rs. 3/- share, gives it an estimated dividend yield of 5.45%, way above the benchmark Sensex dividend yield of 1.13%.

Opportunities as detailed in the company’s annual report for 2018-19:

  • As six mining leases are reserved by the Central Government for GMDC, it will boost the lignite production which will help in increasing revenue of GMDC.
  • There are large amount of reserves of limestone at our upcoming Lakhpat Punrajpur Mining, Panandhro Extension & Bharkandam. GMDC is approaching various cement companies across India for setting up of cement plant where GMDC will be a long term limestone supplier.
  • As the market of overburden minerals like Silica Sand, Ball Clay & Bentonite is increasing, entering into the beneficiation industry of these overburden minerals will have a larger scope in terms of revenue, customer base and market share. GMDC is planning to enter into this beneficiation industry by the way of long term supplies of respective minerals.
  • Joint detailed exploration of manganese bearing area in Dist. Panchmahal & Baroda to be carried out with MOIL Ltd. for further development of a new business prospects.

I don’t want to conclude on a positive note as no one can predict how deep the price can fall, this year, the share price has fallen over 30%. The share has been removed from MSCI Indian Domestic Small Cap Index rejig this year. 

Till next post, take care !!


One Comment Add yours

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s