5 Bonus, 49 Dividends, 2.21% Yield: From Rs 80-To-1,600, IT Stock Infosys Excels In Long-Term; Buy-On-Dips?

The stock market is all about finding the right opportunity for buying and selling to fetch multi-digit returns. The key is long-term! And one such scenario has emerged in tech giant Infosys. Competing with giants like TCS and HCL Tech, the share price of Infosys has rather seen a see-saw movement in 2024 so far. That makes Infosys cheaper by 7% from its 52-week high. The majority of experts have recommended buying Infosys shares, and the highest target price is crossing Rs 1,900.

In the early trade of Wednesday, Infosys' share price slipped below the Rs 1,600 mark to trade at Rs 1,598.30 apiece down by 0.5%, at the time of writing. In the previous session, Infosys was at Rs 1,606.20 apiece.

Currently, Infosys has a market cap is over Rs 6.63 lakh crore. From the latest price levels, Infosys is lower by 7.7% from its 52-week high of Rs 1,731 apiece, but higher by 32% from its 52-week low of Rs 1,215.45 apiece.

The upside in Infosys has been slower in 2024 so far, as volatility continues over uncertainties in macro conditions in the entire IT sector. Year-to-date, Infosys shares have gained merely 3.2%. In six months, the stock gained by 8.4%, and in a year, the stock zoomed by 6.1% on BSE. But in the long term, Infosys is a multi-bagger. In 5-years, Infosys shares have advanced by 125%.

But since its first bonus issue, Infosys has skyrocketed by a whopping 1,724.19% in 20 years.

Infosys Bonus Shares charm:

The first bonus issue was in the ratio of 3:1 by Infosys which came into effect on July 2004. Later, from July 2016 to September 2018, Infosys carried four more bonus shares in a ratio of 1:1 each.

Infosys stock price was merely at Rs 88 on July 1, 2004. So if you held 500 shares of Infosys, after the first ex-bonus, you will receive 1500 bonus shares (500 X 3/1). This will lead to a total of 2,000 shares in Infosys.

Further, after the second bonus issue of 1:1 on July 12, 2006, your 2,000 shares will rise to 4,000 with new 2,000 bonus shares added (2,000 X 1/1). Later on, 4,000 shares will double to 8,000 after Infosys' third bonus issue of 1:1 effective on December 2, 2014. Multiplying further, Infosys shares would rise to 16,000 after the fourth bonus issue of 1:1 came into effect on June 15, 2015. Lastly, the shares would have climbed to 32,000 shares of Infosys after the company's fifth bonus issue of 1:1.

If you have stayed invested in Infosys up till now, then you're crorepati. Because, if we look at the example, 500 shares of Infosys before the first bonus issue, would be around Rs 43,150, as the stock was at Rs 86.3 on June 30, 2004.

But on the current market price, the corpus in Infosys rises to an eye-bulging Rs 5.11 crore (32,000 X Rs 1,598.30).

Infosys Dividend:

Apart from this, although, Infosys has not carried any stock split. The company is among top dividend paying IT stocks. As per Trendlyne data, Infosys has delivered up to 49 dividends. In last 12 months, the company paid up to Rs 35.50 per share dividend. On current market price, Infosys dividend yield is at 2.21%.

Is There a Buy-On-Dips Opportunity In Infosys?

In its latest research report, Nomura said, "Infosys noted that demand for projects with immediate cost-savings remains strong as clients navigate an uncertain macroeconomic environment (in 9M FY24, Infosys won USD13bn in deals). Discretionary demand remains tepid as the focus is on projects with immediate return on investment. While clients have not given up transformation agendas, they await some stability in macroeconomic conditions to restart their paused programs. Infosys management believes its higher exposure to discretionary work (digital business, which formed ~65% of revenue) has been a key reason behind tepid revenue growth in the current environment. Infosys noted that clients are still finalising their budgets for CY24E, and its revenue growth guidance for FY25E will factor in those conversations."

Accordingly, Nomura's note added, "We reiterate our Neutral rating on Infosys with a target price of INR1,500 based on 20x FY26F EPS. The stock currently trades at 23.8x FY26F EPS."

The majority of brokerages are generally optimistic about Infosys. In its gladiator stocks pick, ICICI Direct recommends buying Infosys for a target price of Rs 1,920 apiece in three months. Kotak Institutional Equities Recommend BUY for a target price of Rs 1,800 apiece. Sharekhan has set a target price of Rs 1,850.

As per Sharekhan's last report on Infosys, the margin improvement plan is witnessing traction and the company expects to see higher benefits going ahead. On the valuation, Sharekhan added, "We view Q3 earnings as stable in the seasonally weak quarter and expect the focus to shift to earnings improvement in FY25/26E as headwinds bottom out. We expect large deal signings and continuity of renewals to gain further traction as macro headwinds recede improving earning visibility for FY25/FY26E. Hence, we maintain a Buy on Infosys with a revised PT of Rs. 1850 (Increase in PT reflects the roll-forward to FY26E EPS) At CMP, the stock trades at 23.3x/20x its FY25/26E EPS."

In 9MFY24, Infosys revenue was at Rs 115,748 crore, up by 5.9% YoY. While its operating margin stood at 20.8%, declining sequentially by 0.2% YoY. In constant currency, the revenue growth was 1.8% YoY. Also, net profit was at Rs 18,264 crore, up by 1.7% YoY.

Infosys is a global leader in next-generation digital services and consulting.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.