ITC is both a high dividend yield stock and a growth stock
New Delhi, February 23 (IANS): The company has a good dividend paying track record and has consistently declared strong dividends over the past 5 years. The company is also focused on growth. Diversified multi-business conglomerate ITC remained an attractive dividend bet for investors, coupled with very promising long-term growth prospects in several business segments.
For the current year, the ITC Board has recommended an interim dividend of Rs 5.25 per share (previous year Rs 5.00 per share) for the year ending 31 March 2022.
For 2020-2021, the company’s board had approved a final dividend of Rs 5.75 per share along with the financial results. With this, the company’s dividend for the full financial year 2021 amounted to Rs 10.75 per share, which translates to a dividend yield of 5.07%.
As part of its clearly articulated capital allocation policy, the company had earlier said dividend payouts would be increased to 80-85% of after-tax profits.
Led by Sanjiv Puri, President, ITC delivered strong performance across all operating segments in the third quarter (October-December 2021). Gross revenue stood at Rs 16,633.86 crore representing a growth of 31.3% YoY while EBITDA at Rs 5,102.10 crore increased by 18.2% YoY . The PAT increased by 12.7% year-on-year to reach Rs 4,156.20 crore. Earnings per share for the quarter was Rs 3.37 (prior year Rs 3).
Coupled with the improved break-even point in hotels as well as a structural improvement in its growing and expanding FMCG business with higher revenues and margins, a robust dividend yield above 5% remains a key attraction for investors.
Scaling up the non-cigarette FMCG business along with improving margins would be key triggers for the stock in the medium to long term. Additionally, the strong cash flow and cheerful dividend payout make it a good bet in the current uncertain and disruptive business environment.
In its outlook for the year ahead, JM Financial said: “ITC FMCG may be one of the most undervalued companies of late…We suspect the market may not have yet adopted a holistic view; even excluding a few nascent dairy products from the portfolio, the addressable opportunity for ITC is still $22 billion – larger than the size of the markets of the closest peers. The same should soon be factored into the assessment,” he added.
Powered by mega brands such as Aashirvaad, Sunfeast and others, ITC is poised to take a dominant position in a Rs 5 lakh crore global addressable FMCG market with Sanjiv Puri setting in motion a carefully crafted ‘ITC Next’ strategy. focused on healthier margins, agile innovation, an asset-driven strategy, developing new routes to market, and a future-ready product portfolio.
As an FMCG major, ITC is the only company that dominates in a range of product categories ranging from snacks to spices, cookies to branded atta, noodles to dairy, chocolates to coffee, deodorants to hand washes and body, from product hygiene to floor cleaners as well as notebooks and agarbattis, where none of the Indian or multinational brands can claim to be present.
Sanjiv Puri’s “ITC Next” strategy revolves around a multi-pronged approach to revitalize the FMCG portfolio by strengthening the portfolio of mega brands, including Aashirvaad, Sunfeast, Bingo, Classmate and others, while leveraging adjacency of brands and incubating new categories by creating new platforms. of innovative products. Focused on performance, the FMCG businesses have shown steady growth for 3-4 years. Puri’s strategies for achieving industry-leading growth and profitability also include a strong focus on digitization at all nodes of the value chain.
In the three years from FY17 to FY20, ITC’s earnings per share (EPS) increased 47%, while return on capital employed (ROCE) increased from 61% to 72 % over the same period.
Each of ITC’s businesses has pivoted to create new frontiers for the future, with increased competitiveness as well as a stronger focus on cost management to strengthen leadership or quickly reach the top positions in the case of new segments of activity. Sanjiv Puri’s ITC Next strategy has also focused on adding value in the paperboard and food and beverage sectors, which appears to be bearing fruit, as evidenced by recent third quarter results.
In hotels, Puri has also implemented a carefully orchestrated asset rights strategy that provides increased focus and momentum on management contracts. The hotel business has significantly reduced its capital intensity with the adoption of this “Asset-Right” strategy to fuel accelerated growth.
During the pandemic, the hospitality industry also innovated several unique offerings aimed at generating additional revenue, which included innovative stay-cation packages and offering in-home dining experiences given its iconic reputation in the kitchen.