SQS India attractive on higher dividend yield

After the Securities Appellate Tribunal stayed the Sebi order, trading in the stock resumed on August 14. Since then, the stock has lost nearly 10%. MUMBAI: The stock of SQS India BFSI, a small cap software testing firm, has been volatile since August 8 when it appeared in the list of shell companies issued by markets regulator Sebi.

A sharp drop in the stock price has led to a higher dividend yield of the Chennai-headquartered company making it attractive for the long-term investors. SQS India BFSI was included by the regulator in the list of shell companies earlier last month. Subsequently, the trading in the counter was halted between August 7 and August 13.

After the Securities Appellate Tribunal stayed the Sebi order, trading in the stock resumed on August 14. Since then, the stock has lost nearly 10%.

The company provides business assurance and software testing services to clients in the financial sector across Asia-Pacific, the Middle East, the UK and the US. It is a subsidiary of Germany-based SQS Group. The company is a consistent dividend payer.

It paid Rs 24 in dividend in each of the three years to FY17. Considering Friday’s closing price of Rs 455, the company’s dividend yield works out to be 5.3%. Dividend yield is a ratio of annual dividend and the current stock price. Dividend in the hands of investors is tax-free in India up to Rs 10 lakh.

It reflects the potential return an investor may earn assuming that the company retains the dividend level in future.

Therefore, the current dividend yield of SQS India for small investors is better than an investment in fixed-term deposits, which tend to offer after tax return of under 5%.On the operational front, the company has a strong parentage in the form of SQS Group, which is the world’s largest independent quality assurance company.

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