Thursday, August 1, 2013

Allahabad Bank Dividend Yield and History

Public Sector Banks stocks have fallen like house of cards on the back of heavy portfolio selling fearing the exponential rise in non performing assets in coming months. 

The gross and net non-performing assets of almost all public sectors banks are rising fast since past couple of quarters mainly due to debt restructuring and casualties in specific large accounts. However the steep fall in stock prices have made most of the PSBs attractive for medium to long term investors as they are trading at historical low valuations and high dividend yields.

Allahabad Bank
Financial Year
Dividend Per Share

For instance Allahabad Bank a mid sized public sector lender having business size of 3 lakh crores plus is down to sub 70 levels and is trading at 0.3 times FY-13 book value. The bank paid Rs.6 as dividend in FY-12 and FY-13 which works out to a dividend yield of around 9% at current market price of Rs.68.

Allahabad Bank in particular and Public Sector Banks in general have stable track record of dividend payout and hence investors with 2-3 years horizon can enter the stock at Rs.68 and enjoy an annual tax free return of around 9% plus capital appreciation as the stock prices of these PSBs will definitely go up once the economy recovers and interest rates comes down.

Allahabad Bank 5 year chart
Allahabad Bank 5 year chart

There might be instances of fall in dividend payout if profits of these banks go down due to looming NPA problems but they will be the fastest to recover when those bad loan start getting repayed once economy recovers. Hence a view of at least 2 to 3 years should be there while putting money into these stocks.


  1. i have bought allahbaad at level of 130 as one of your writing said it has support around 130 levels.
    should i avg the cost at current level of 70.

  2. Yes you should try to buy more on every decline if you haven't already committed more than 10% of your entire portfolio into Allahabad Bank.

    However attractive a stock is, portfolio allocation strategy should always be maintained. A stock can be attractive at 100 but it can fall to 50 bucks depending on market situation or economy. That is why if you have 10000 to invest buy in 4 tranches of 2500 each. While in this profession a balance of risk and return should always be maintained to stay alive.

    You can learn from the model portfolio I have been running since march 2013 and it's quite successful even in this very turbulent times.

    Amit Agarwal investment Portfolio

  3. hello sir, i get emails from your site. but i never get email of your model portfolio. i never new that you have added some stock and avg them. i m stuck in albk and idfc and bp.. at higher levels. do u still suggest that i shud avg at cmp and bring down the cost? also i have request that please please send notification email of the updated model portfolio as well so that we can trade accordingly.

  4. Sorry for that and point taken... From now on there will be an email update to all the email subscribers if there is any update to the model portfolio.



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