4 Debt Free Companies, With Low P/E, ROE More Than 20% And High Dividend

There are 4 companies that we come have across that are debt free, have low P/E and ROE more than 20%. Investing in a debt free company means, the company has no debt strings attached, there is no interest repayment burden, thus insulating debt-free companies from the changes of the interest rate regime.

Such a company has no creditors to make claims on the company's asset and easily gets a loan in case of any emergencies. Additionally, it is noticed that zero-debt company likely has strong fundamentals, is self sufficient and stable to run its operations, thus it can pay higher dividend yields.

But being a debt free company is not the only parameter that one should look for, before buying a stock for long term. There are few other financial parameters as well like the return on equity (ROE), price earnings(P/E) ratio and earnings per share. But in this we will cover a bit about ROE and P/E.

What is ROE?

Return on equity is a measure of a company's financial performance in short. It is a function of four factors viz. leverage, cost of leverage, operating profitability and efficiency of the company. It is expressed as a percentage. It is calculated by dividing profit after tax of a company with total equity of the company or net income divided by the value of shareholders' equity.

It helps in understanding the company's profitability, how the higher the ROE, the better is the profitability of the company and efficient it is in generating profits. But depending upon the industry or sector in which the company operates it varies.

What is P/E?

The price-to-earning ratio or P/E ratio is used to determine the stock valuation. A P/E ratio can reveal how a stock's value compares to its industry group or the index like BSE or NSE. It also helps to determine the market value of a stock as compared to the company's earnings.

In short, the P/E shows what the market is ready to pay today for a stock based on its past or potential earnings. A high P/E ratio indicates that a stock's price is high relative to earnings is overvalued. Likewise, a low P/E ratio points indicate that the current stock price is low relative to earnings.

Additionally, a high P/E ratio of a company may mean that it is expected that revenue would grow faster in the future. Based on it a speculation is done, leading to a spurt in its current stock prices.

Here are 4 companies that are debt free, have low P/E and ROE of more than 20%.

Life Insurance Corporation of India

Life Insurance Corporation of India is one of the largest Insurance company in India, which was listed lasted year. Its dividend yield at the current stock price of Rs 537 per share results in 0.28% and the current market capitalisation is Rs 339,621 crore. It has the highest ROE of 48.2 % and P/E of 13.4.

Bhansali Engineering Polymers Ltd

Bhansali Engineering Polymers Ltd is a vertically integrated petrochemical company that is into manufacturing of ABS (Acrylonitrile Butadiene Styrene), a raw material used extensively across industries like automobiles, home appliances, telecommunications, luggage and other sectors. The company was incorporated in 1984 and also manufactures resin. Its market capitalisation is Rs 1,459.14 crore. Based on the current market price of Rs 87.9 per share of the stock, the dividend yield translates to 3.42 %. It has a P/E of 7.50 and high ROE of 42.1%.

VST Industries Ltd

VST Industries was incorporated in November 1930 that manufactures and distributes cigarettes and tobacco products. It has a market capitalisation of Rs 4,805.53 crore. The company's dividend yield is 4.50 %, based on current market price of Rs 3,107 per share. It has an ROE of 31.7 % and P/E is at 13.9.

Brightcom Group Ltd

The Brightcom Group is a digital marketing company founded in 2000 with offices in US, Argentina, Brazil, Chile, Uruguay, Mexico, UK, France, Germany, Sweden, Ukraine, Serbia, Israel, China, India, and Australia, and with representatives or partners in Poland, and Italy. Its current market capitalisation is Rs 3,355.80 and has an ROE of 21.3%. The company's dividend yield results to 1.82% based on the current market price of the stock of Rs 16.6 per share.

Important thing about dividends in this article

We could have factored in special dividends and one off-dividends. It is highly possible that such companies maybe included in the list. Sometimes companies tend to declare huge dividends on account of sale of an asset. Apart from this another important think to remember is that dividends would not be consistent or the same every year. So, we have not factored that as well in our current write-up.

Disclaimer

This article is for information purposes only and highlights stocks that declared a good on dividends. The article should be treated as informational and not an advisory to invest. Neither the author, nor Greynium Information Technologies Pvt Ltd should be held responsible for decisions based on this article.