NMDC and Nalco stocks look attractive after a year-long decline

After a sharp fall over the last one year, stocks of state-owned mining companies -NMDC and Nalco -look attractively valued for investors who prefer to buy companies with good dividend yields.

Cash on the books of NMDC as on March 31, is almost half of its market cap, while in case of Nalco it is little over 50 per cent. In addition, both these firms have a strong dividend-paying history.

In 2014-15, NMDC paid 56 per cent of its profits in dividend, while Nalco paid around 35 per cent in dividend.

A weakness in the global iron ore and alumina prices was the key reason for the sharp fall in the stocks of these two companies. As a result, NMDC and Nalco, which supply products mainly in the domestic market, were forced to take price cuts.

NMDC's stock is down 40 per cent in one year, while Nalco's stock fell 32 per cent. However, the downside from here would be limited as these companies would become very attractive in terms of dividend-yield ratio.

Insurance funds usually buy in such firms which have high cash and dividend history. Major concern, however, would be that they are likely to report lower profits this fiscal due to weak prices, which may impact their dividend-paying ability.

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