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)
Established in 1963, it’s a state owned enterprise – 74% stake is held by the promoter – Govt of Gujarat
 It is a commodity company, involved in extraction of minerals – lignite (coal) and bauxite (alumina) and power generation
80% of its profit before tax is contributed by the sale of lignite and is the largest merchant seller of lignite in the country
 Debt free company
 It’s book value is at Rs. 135.76/- per share and it’s current price is 0.41 of it’s book value
 Steady dividend percentage at 150% of its face value of Rs.2/-
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 !!