This largecap stock is set to turn ex-dividend in June

Larsen & Toubro's revenue has grown at a CAGR of 10% over the past three years, driven by a high inflow of orders across segments. (Photo: Bloomberg News)
Larsen & Toubro's revenue has grown at a CAGR of 10% over the past three years, driven by a high inflow of orders across segments. (Photo: Bloomberg News)

Summary

  • This stock has remained an investor favourite for quite some time, due to its sharp focus across business verticals.

Larsen & Toubro (L&T) shares will be in focus soon, driven by the company's substantial dividend payout for the financial year 24 (FY24). The stock has been a favourite among investors due to its involvement in various business verticals, including infrastructure, power, hydrocarbon, metals and minerals, defence, aerospace, information technology (IT), products, systems and equipment, finance, and real estate.

While L&T has a presence in multiple sectors, it is particularly known for its expertise in construction, EPC (engineering, procurement, and construction) projects, and manufacturing.

Quarterly performance and upcoming dividend

A month ago, L&T announced a robust quarterly update along with a significant dividend payout. The company’s board has recommended a final dividend of 28 per equity share for FY24, in addition to a special dividend of 6 apiece paid in August 2023.

The record date for determining shareholders' entitlement to the final dividend is set for Thursday, 20 June 2024. This dividend will be paid after shareholder approval at the upcoming annual general meeting (AGM).

Adding the 28 per share dividend to the special dividend of 6 per share brings the total dividend payout for FY24 to 30.1%. L&T has a history of consistent dividend payments to its shareholders since 1994, with a five-year average dividend payout of 43.2% and a current dividend yield of 0.7%.

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The company had also announced its first buyback in July 2023, where it bought back shares worth 100 billion from its shareholders.

Growth and financial performance

L&T’s diversified presence across key sectors has been instrumental in its consistent growth. This is reflected in its stock performance over the years.

In the past three years, the company’s revenue has grown at a compound annual growth rate (CAGR) of 10%, driven by a high inflow of orders across segments. Net profit also saw a CAGR of 39.3%, boosted by the high-margin EPC business.

Looking ahead, L&T has projected a 12-15% growth in order inflows over the next decade. With a favourable government tender conversion ratio and a five-year low domestic share of order backlog at 73%, the company expects a significant portion of its revenue to come from the pending order book.

The company also anticipates its return on equity to nearly double in the next five years, thanks to increased order book traction and higher margins in new revenue segments. Given L&T’s expansive growth across its business verticals, sound financials, and promising growth prospects, the company is well-positioned to continue its upward trajectory, even at slightly higher valuations.

Over the past year, L&T’s stock price has already surged over 60%, underscoring the market's confidence in its growth strategy and financial health.

Here’s a table comparing L&T with its peers:

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For more on L&T, watch this video where co-head of Research at Equitymaster Tanushree Banerjee talks about the company’s role in green hydrogen profits.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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