As per a filing with the stock exchanges, the Coal India’s (CIL) board has approved an interim dividend of Rs 27.4 per share for FY16. The payout date is March 21, and the ‘record date’ for payment is March 15.
As was the case in FY14, given that the Government of India (GoI) is unlikely to raise funds via disinvestment of its stake in CIL up to a 10 per cent this year, we think that it likely pushed for CIL’s board to declare a hefty interim dividend of Rs 27.4 per share. This is a positive surprise vs our forecast for a dividend of Rs 20 per share and consensus estimates. At the current market price, the post-tax dividend yield is 8.4 per cent, an attractive level in the benign interest rate scenario, in our view.
The total cash outgo on account of the interim dividend for CIL will be Rs 208.2 billion (Rs 33 per share), comprising Rs 171.7 billion for the dividend + Rs 35.1 billion for dividend tax. The GoI’s share of this payout will be Rs 173 billion (79.65 per cent of the dividend + 100 per cent of the dividend tax).
We believe that CIL remains a solid long-term story. On our FY17F adjusted earnings (adding back OBR to EPS and EBITDA), the stock trades at 10.3x P/E (EPS: R31.6) and 6.1x EV/EBITDA (11.3x P/E and 6.5x EV/EBITDA on reported earnings).
