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
2009	2.5
2010	5.5
2011	6
2012	6
2013	6

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

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.