Dividend Analysis : PIRAMAL GLASS CEYLON PLC(GLAS.N0000)

From a initial [Scan] of CSE I'm looking for a good dividend paying counter to add my portfolio. Earlier I looked at [NDB], but I'm not completely satisfied about the results. Then I picked GLASS because it has the highest five year dividend growth rate(84%) and EPS growth rate(74%).

My History With GLAS

I've had glass in my PF before. So that I know about the company a bit. About two years ago I made this post at Sri Lanka Equity Forum. If you do not about it yet, I seriously suggest you get registered there. It's a good place to get general information and opinions.

Followings are the points I made about two years ago.
  1. Expiration of BOI tax free period of 5 years in Dec. 2012
  2. Rising energy cost.
  3. Rising cost of Soda Ash

Now  2 years(actually 21 months) have passed by and GLAS price have come down from 6.00 to 4.20(LKR). That's a 36% price drop and I think current price reflect the points I raised above. As GLAS came high in our search, I think it is better to revisit the above points.
  1. Company now pays 10% income tax (for 2013 & 2014). After 2014 they have to pay 20%.
  2. Furnace oil price rose by 80% during 2012 and electricity by 20% from April 2013.
  3. Soda Ash price has come down by 25%(Approx.) 

That's about the history and a bit of future. Now lets look at the dividends.
 

GLAS Dividends

This is the dividend history to GLAS from 2006(7 years).
  

As you can see, they had problems in 2009 and 2010. And they had a dividend cut in 2010 & 2012. A company not increasing the dividends at a inflation beating rate is a concern for me. A complete cut is a nightmare. I seriously consider selling when a company cut or freeze dividends.

Anyway now we are at the end of 2013. Price have fallen to reflect the business challenges. It is nice to see how a dividend investor would have performed during past 7 years. Here is a simulation of gain/loss of glass from 2006.

Light Blue line indicate the YOY loss or gain
Dark Blue line is the annualized gain with dividend being re-invested
Red line is the annualized gain without dividend being re-invested

 
There are two interesting points to note in the graph.
1. Reinvesting dividends will always minimize the loss and maximise the profit.

This is something I always say in this blog. Dividends do protect the investor in multiple ways.

2. Some times it is better to sell and book the profit.
There is no harm in selling some of your holdings and realizing the profit if you are not sure about the future. As a rule of thumb, If you can get 5 years worth of dividend income within 6 months it is better to sell and book the profit.
 

Conclusion

Trading at 52 week low, I think GLASS is bit under valued now. However immediate future may pose some risk. For a long term investor this could be an oppetunity to collect some. This is a well established and essential business. Business may be slowing down a bit.  Margins may get shrink a bit. But people are going to use GLAS products for the forseable future. I'm going to keep GLAS in my watch list. I will take my time to analyse few more counter before making a move. 

I'm going to look at LFIN next. If you have your favourite in the list, comment below so that I can have a look at it.
 

Cheers...