Two IT Sector Stocks Trading Near 52-Week High Declares Dividends; Should You Buy?

After Tata Consultancy Services (TCS), a leading IT company, announced improved margins, attrition rates, and order inflows during the April to June 2023 quarter, Indian IT stock witnessed a strong buying demand in early morning transactions. HCL Technologies Ltd., a global IT company, also witnessed a jump in its share price on Thursday in early trade.

Both the IT stocks, TCS and HCL Tech, have declared an interim dividend for the Financial year 2023-24. Check below to know more:

1. Tata Consultancy Services (TCS)

On Jul 12, 2023, the Board of Directors of TCS declared an interim dividend of Rs 9 per Equity Share of Rs 1 each of the Company.

The Company fixes Thursday, Jul 20, 2023, as the Record Date for the said Interim Dividend.

TCS is Tata Group's flagship company that operates in the IT sector. It is a large-cap company with a market capitalisation of Rs 12,75,289.18 Crore.

Should You Buy?

According to Motilal Oswal, Given its size, order book and exposure to long-duration orders and portfolio, TCS is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth. Owing to its steadfast market leadership position and best-in-class execution, the company has been able to maintain its industry-leading margin and demonstrate superior return ratios. "We maintain our positive stance on TCS. Our TP of INR3,790 implies 25x FY25E EPS, with a 16% upside potential. We reiterate our BUY rating," the brokerage has said.

Stock Outlook & Potential Upside

According to the given target price of Rs 3,790 apiece by Motilal Oswal, if you buy the stock at the current market price, it can give up to 10% returns.

The stock of TCS is currently trading at Rs 353 apiece on BSE, up 3.36% from its previous close. It hit an intraday high of Rs 3455.15 apiece and an intraday low of Rs 3352.05 apiece.

The stock is trading 3.53% down from its 52-week high of Rs 3575 apiece, recorded on Feb 16, 2023. While its 52-week low it hit on Sep 26, 2022, at Rs 2926 apiece.

In the past 1 week, it gave 4.70% positive return and and 1 month, it gave 7.08% positive returns. It has given 16.12% positive return in the past 1 year, 8.35% in the past 2 years, 60.34% in the past 3 years and 75.75% positive returns in the past 5 years, respectively.

2. HCL technologies Ltd.

On Wednesday, Jul 12, 2023, the Board of Directors of HCL Tech declared an Interim Dividend of Rs.10 per equity share of Rs.2 each of the Company for the Financial Year 2023-24.

The Board also fixes Record Date for the said dividend as Jul 20, 2023.

The payment date of the said interim dividend shall be August 1, 2023, according to the exchange filing.

HCL Tech is a leading global IT services company, which is ranked amongst the top five Indian IT services companies in terms of revenues. The company has a market capitalisation of Rs 3,10,470.42 Crore. It is a large-cap IT company.

Should You Buy?

ICICI Securities said, "HCLT missed our estimates on all fronts including revenue, EBIT and EPS. It reported soft orderbook (contrary to strong growth at TCS). No guidance cut to either revenue (68% YoY in CC terms for FY24) or EBIT margin (18-19%) implies potential sharp pick-up ahead in earnings growth for HCLT. Having said that, we believe given continued uncertain macro environment particularly for verticals like banking, hi-tech and telecom, it would be a good outcome even if HCLT ends up at the lower end of its guidance for FY24 at 6%. We are currently building-in 2.9%/4.1%/2.0% QoQ CC growth for HCL over Q2/Q3/Q4 FY24E and expecting FY24E CC growth at 6% YoY with EBIT margin at 18.2% (flat YoY). At this growth, HCLT would still likely be the fastest growing large cap IT services company (except LTIMindtree) this year and deserves to trade at a premium to its historical 10-yr average of 15x. Improving RoE/RoCE metrics and improved capital allocation framework with higher dividend payout policy should further warrant a premium to its historical trading range."

It added, "We cut our FY24E EPS estimate by 1% given the sharp EPS miss of 7% in Q1FY24 vs ISEC estimate, but largely maintain our outer year EPS forecast. We upgrade HCLT to BUY with 12-month SoTP-based target price of Rs1,275, implying 15% potential upside. Sharp pickup in growth ahead with strong December quarter seasonality due to software licensing business makes HCLT a strong tactical and relative BUY in our coverage."

Potential Upside and Stock Outlook

Given the target price of Rs 1275 apiece by ICICI Securities, if you buy the stock at the current market price, it can fetch up to 12% gains.

HCL Tech's stock is currently trading at Rs 1145.10 apiece on BSE, up 3.24% from its previous close. The stock hit an intraday high of Rs 1145.65 apiece and an intraday low of Rs 1110.55 apiece.

The stock is trading 5.03% down from its 52-week high of Rs 1202.70 apiece, which it recorded on Jul 05, 2023. While it hit its 52-week low on Aug 29, 2022, at Rs 875.65 apiece.

The stock declined 0.40% in 1 week. While it jumped 1.47% in 1 month and 7.52% in 3 months, respectively. It gave 27.52% positive return in 1 year, 16.46% in 2 year,s 95.06% in 3 years and 134.02% in 5 years, respectively.

Disclaimer

The stocks have been picked from the brokerage reports of Motilal Oswal & ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.