J&K Bank Declares Dividend Of Rs 33.50 Per Share

Jammu & Kashmir (J&K) Bank closed lower today by almost 3.36 per cent at Rs 965. This was after the bank decided on an ex-dividend date for today i.e. July 5, 2012. Investors should note that the bank has declared a dividend of Rs 33.50 per share for the year ending 2012. The bank had created a 52-week high at Rs 1,010 only a few trading days before i.e. on July 2, 2012. Usually the stock price takes a southward move when any company fixes its ex-dividend date as investors holding the shares before the ex-date get the dividend that is declared by the company.

Our regular investors and readers would recollect that we had recommended J&K Bank in our Flash News Investment Journal, Volume No 28, Issue No 19, dated May 28, 2012 at Rs 925 per share and as a ‘choice scrip’ at Rs 947 in our latest issue of Dalal Street Investment Journal Vol No 27, Issue No 15. Even after today’s fall the scrip is trading comfortably higher by 4 and 2 per cent respectively. Further, investors would receive a dividend of Rs 33.5 per share which is exempted from income tax. The dividend yield of the company also stands out to be around 3.35 per cent, which should be considered as very good.

J&K Bank has shown a robust financial performance. It also has low and good asset quality, sustainable margins, good business growth, and is available at decent valuation which makes it worth buying. For further information you can refer to our magazine or the article titled ‘Jammu & Kashmir Bank – Worth Buying’ on our website under the Mindshare tag.

For 2011-12 the advances and deposits of the bank showed a robust growth of 26 and 19 per cent respectively which is above the RBI’s projections of around 16 and 15.5 per cent respectively. Further, the net NPAs of the bank stand at 0.15 per cent - one of the best in the industry. This is coupled with a high provision coverage ratio (PCR) which stands at 93.76 per cent. This reduces the risk of the bank’s asset quality from getting deteriorated. The net interest margin (NIM) of the bank has seen improvement and is now at 3.86 per cent.

For FY13 the management has set a business target of Rs 1,00,000 crore (Rs 85,000 crore for FY12) with net profit of Rs 1,000 crore (as against Rs 803 crore for FY12). We believe that the bank will perform well going ahead too and would also post good June quarter numbers. We would advise all our investors and readers to hold their positions as we feel there is good potential upside for the stock going ahead.