There are more than 7,000 companies listed in Indian stock market, picking the right one for your portfolio is a tough task. When it comes to investing stocks, there are many questions that an investor goes through. Will the past performance of the stock continue in the future as well? What kind of returns can I expect from this stock? How will be the dividend payments in the future? Fortunately, there are many companies that have been consistent with their performance in the past and will be performing well in the future. These companies have a long history and a strong business behind them, have stood the test of time and have always been investor friendly. These companies have always been generous dividend payers and will continue to do so in the future as well.
ITC is more than a 100 years old company. ITC started as a cigarettes manufacturer but later diversified in various sectors such as FMCG (Fast Moving Consumer Goods), Hotels, Agri business, paper boards and stationery. Majority of Company’s revenue is still dependent on Cigarettes. More than 60% of the sales and 80% of the Company’s profits comes from cigarettes business. Company is rapidly expanding its FMCG business and is now the third largest FMCG Company in the country. With continuous brand acquisitions like “Shower to Shower” and “Savlon” (ITC wants to make Savlon a Rs. 500 crore brand in the next 2 to 3 years), company is planning to expand its business and penetrate deeper in tier 2 and tier 3 cities taking advantage of strong distribution channel it has from its Cigarettes business.
Talking about financial performance, ITC has been a consistent performer and has been a generous dividend paying company. ITC’s earnings have seen a consistent growth; company pays about 65% of its net profit as dividends. ITC is a debt free company, and has given good Return on Equity of about 27% in the past three years.
For more detailed analysis about ITC, please read our detailed analysis. The link is given below:
Nestle India is the subsidiary of Nestle S.A Switzerland. It is the largest processed food company in India with a wide variety of products available. Some of the most popular products by Nestle India are Nescafe (The most popular coffee brand almost synonymous to Coffee in India) Maggi (Products like tomato ketchup, Instant noodles and taste enhancer spices are under the same brand name) Company also owns the best brands of the most famous chocolates such as Kit Kat, Munch, and many baby products such as lactogen, ceralac. Nestle India has almost 65% market share in instant noodles segment, Maggi Tomato Ketchup enjoys market share of almost 40%, highest in the tomato ketchup segment. In the baby food segment, company enjoys 85% market share, way ahead of all the other competitors in India.
Looking at the financial performance, company has performed well in the past decade. Company’s Earnings per share has grown at 11.5% CAGR (Compounded Annual Growth Rate) per year. Nestle has seen a significant fall in its earnings due to ban on Maggi’s instant noodles by FSSAI because of lead content beyond permissible levels. However, Nestle India has complied with the safety standards, scarped all the Maggi noodles stock, and released fresh ones that were as per the FSSAI standards. This caused loss of sales and earnings, as Maggi Noodles stayed out of market for a good five months. To compensate the loss of sales and earnings, company adopted aggressive marketing strategy and launched 40 new products in 5 months which includes new category of instant noodles called “Maggi Hot Heads” and many others. For a detailed fundamental analysis of Nestle India, please click on the link mentioned below:
Pidilite Industries is an adhesive manufacturing company, Company manufactures different types of products in various categories such as adhesives, sealants, construction chemicals and art material. In the adhesives segment, company has a flagship product names fevicol which is used in making furniture and pasting veneers and mica. Another adhesive product manufactured by the company is fevi kwik, which is industrial strength epoxy adhesive used for various purposes. In sealants, Pidilite has a product named M-Seal which is used to fix leaking water pipes, water tanks and faucets.
In the adhesive and sealants segment, company enjoys almost monopolistic position as there is no major competitor for the company in this product segment. 50% of the company’s revenue comes from the sale of adhesives and sealants. The other revenue segments for the company are construction chemicals. In this segment, company has product named Dr Fixit, which is a waterproofing products used in buildings for waterproofing purposes. Almost 20% of company’s revenue comes from the construction chemicals segment.
Looking at the financial performance of the company, Pidilite Industries has shown a healthy growth in the past 5 years. Company’s EPS has grown at a rate of 15% CAGR per year; Pidilite Industries has been a zero debt company for past many years with a healthy ROCE (Return on Capital Employed) of 25%. For more detailed information about the company, please read our analysis on Pidilite Industries, the link is given below:
Asian Paints is engaged in the business of manufacturing, distributing and selling paints, coatings and home décor products. Asian Paints manufactures products both for domestic as well as industrial purposes. Company has a wide variety of products in various price segments. Company enjoys more than 50% market share in the paints segment. Asian paints has diversified its business in bath fittings with brand name Ess Ess and modular kitchens by acquiring brand name Sleek. Company has also started offering decorative wallpapers under brand name Nilaya.
Looking at the financial performance of the company, Asian Paints has seen a healthy growth in its income in the last 5 years. Company’s EPS has grown at 11.5% CAGR in the past 5 years. Asian paints is a debt free company and enjoys a healthy ROCE between 25% to 30%. Asian Paints is also a generous dividend paying company, and pays about 42 to 45% of its Net Profit as dividends. For a detailed analysis of Asian Paints and its fundamentals please visit the link given below:
HUL (Hindustan Unilever Limited):
HUL is a market leader in FMCG sector. It has a huge portfolio of branded products in 20 different categories, some of which are household names. Company makes and distributes products in various categories such as soap, tea, detergent, cosmetics, food etc. Some of the most well known brand names of HUL are as follows:
Soaps: Dove, Lux, Pond’s, Pears, Lifebouy, Liril, Rexona,
Detergents: Rin, Surf, Wheel, Comfort fabric softener, Vim Dish wash bar, Cif liquid,
Personal Care: Lakme, Tresemme, Sunsilk, Axe, Fair and Lovely, Brylcreem, Close Up toothpaste, Clinic Shampoo, Denim Shaving cream and after shaves, Vaseline
Food and beverages: Brooke Bond (Red Label, Taj Mahal), Knorr, Annapurna Atta, Kissan Sauce and Jams, Bru coffee, Kwality Walls ice cream
HUL dominates the Indian FMCG market; two out of every three consumers buy an HUL product. Company has achieved this position by penetrating deep in the rural Indian market and creating a strong distribution network.
Looking at the financial performance of the company, HUL has moved beyond its growth phase and is now a strong dividend paying stock. HUL distributes almost 80% of its Net profit as dividends. Company enjoys high ROCE of about 60%. For detailed analysis of HUL, please visit the link below:
All the stocks discussed above are market leaders in their respective industries and are held by reputed fund houses and mutual funds. These stocks are suitable for portfolios that are designed for long term investment perspective or for dividend income. Any beginner looking to invest in stocks for the first time, should also consider them as they are defensive stocks and do not see huge volatility, keeping investments relatively safe.