Stock Valuation & Dividend Analysis: Tata Global Beverages Ltd (500800)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
Consumer Defensive – Consumer Packaged Goods – Packaged Foods INR237.30
@ 26 Jul 2018
COMPANY PROFILE Tata Global Beverages Ltd along with its subsidiaries is engaged in the trading, production and distribution of tea, coffee and water. It operates in Branded Segment and Non Branded Segment.

Tata Global Beverages Ltd is a beverage company that distributes its products to India, Europe, the U.S., Canada, South Asia, Australia, and Africa. The company owns a portfolio of brands in tea, coffee, and water such as Tetley, Tata tea, Vitax, Grand coffee, Eight O’clock, and Himalayan. More than two thirds of group revenue is sourced from tea sales, with the remaining from coffee and other beverages. The company’s business segments include: Tea, which cultivates, manufactures, blends, and sells tea in packets or bulk; Coffee and Other, which processes and sells coffee; and Others, which consists of water products sales and other businesses. Geographically, the Indian operation contributes the most of sales revenue among all regions.

Stock Code 500800
Stock Valuation and Dividend Analysis Below

Tata Global Beverages Dividend Yield

For stocks that has a history of paying meaningful dividends, the stock price is often dependent on how much dividend the company pays.
At the price of INR237.30 as at 26 Jul 2018, Tata Global Beverages Ltd is trading at a Dividend Yield of 1.9%. This is a 16.8% discount to its historical average Dividend Yield of 1.6%.  (Note: The lower/higher the dividend yield, the more expensive/cheaper the stock is.)
Is the stock overvalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
We should not only be concerned about the amount of dividends, we should determine if the dividends paid out by the company are sustainable. One way to do that is to compare dividends paid out to the cash flows that the company is generating.
The company usually pays less dividends than its free cash flow, which is good.

Tata Global Beverages Dividend vs. Free Cash Flow

Source of Data: Charts are from ProThinker Stock Report. Company description, historical financial statements data and price data are from Estimates are from gurufocus and/or – Thomson Reuters.
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