This stock in IT company MNC offers a 5.5% dividend yield, is debt-free, with a strong brand
Good financial figures
Oracle Financial Services Software reported net profit for the quarter ending December 31, 2021 at Rs. 435 Crore, up 1% year-on-year. Revenue for the quarter was Rs. 1,266 Crore, up 2% year-on-year.
Operating profit for the quarter was Rs. 558 Crore, down 4% year-on-year. For the nine months ended December 31, 2021, revenue increased by 5% compared to the previous nine months ended December 31, 2020, while net profit increased by 8% and operating profit by 5%. The company saw strong commercial momentum and signed $15.6 million in license agreements during the quarter, bringing the cumulative number of license signings for the nine months ended December 2021 to $75.3 million , or 21% more than the corresponding period of the previous year.
Good on dividend yields
Oracle Financial Services has always offered very good dividends to its shareholders. The company in May last year (2021) paid a dividend of Rs 200 per share and before that it paid a dividend of Rs 180 per share. We believe that in the coming years, with strong commercial momentum, the company could indeed increase its dividend.
Based on the current market price of Rs 3550, the dividend yield works out at around 5.60%. It’s fantastic coming from a multinational that has strong brand equity.
Cheap in terms of ratings
We remain confident that the company can deliver an EPS of Rs 240 in the future. If we assume that in the financial year 2022-23 the company delivers EPS of around Rs 240, the stock is not very expensive at 14 times.
Interestingly, the stock has fallen from levels of Rs 5145 to current levels of Rs 3551, providing a good long-term outlook for investors. Given that the dividend yield itself is around 5.6%, the stock is a good choice at current levels for investors. However, what we recommend is to buy the stock in small quantities and avoid buying as a package. Investors with a long-term perspective should accumulate the stock on the downside.
Markets could see a decline
We believe that the markets may have greater downside potential and therefore investors should be careful when investing. It is important to buy small quantities and preferably by SIP every month. Avoid buying large amounts as the markets are vulnerable at higher levels to a decline. With interest rates in the US likely to rise over the next few months, we could see equities drop a bit. Be sure to buy stocks that are only fundamentally sound. Shares of Oracle Financial Services were last seen at Rs 3551 on the NSE.
Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies Pvt Ltd and the author are not responsible for any losses caused as a result of decisions based on the article. The author and his family do not own any of the titles mentioned above.