Should you buy Coal India shares for dividend rewards? What yield, history suggest - Experts share targets

Coal India's March quarter results were largely in line with expectations, but the miner at 239 million tonnes missed its production target for FY26 annual target due to weak power demand. Analysts are mixed over the stock's prospects despite the scrip commanding a dividend yield of 6 per cent. They factored in 4 per cent volume growth annually over FY26-28. Brokerages said e-auction prices are range-bound and do not mimic higher global prices, adding that higher mining cost and the upcoming wage hike revision from July for non-executives may keeps its earnings visibility low.

"Owing to this, we cut FY27E Ebitda by 2 per cent, but due to higher cash inflow because of stake sale in BCCL and CMPDIL, we increase the target to Rs 396 (earlier: Rs 384), valuing the stock at 5x FY28E EV/Ebitda; maintain ‘REDUCE’," Nuvama Institutional Equities said.

The brokerage said the only silver lining is that the Coal India Ltd stock is available at a dividend yield of 6 per cent. Nuvama sees  Rs 26.50 per share dividend in FY27E and FY28.

Coal India dividend history
Coal India is a consistent dividend payer. It declared a final dividend of Rs 5.25 per share for FY26. Earlier, it announced interim dividends of  Rs 5.50 per share, Rs 10.25 and Rs 5.50 per share, taking total dividends for the year to Rs 26.50 per share. Coal India declared Rs 13,157.48 crore or Rs 26.50 per share in dividends in FY25, with a dividend yield of 6.65 per cent. Its dividend yield stood at 5.88 per cent, the PSU declared Rs 25.50 per share or Rs 12,633.63 crore dividend in FY24. It declared Rs 12-29 per share dividend in the preceding 10 financial years, commanding 4-12 per cent dividend yields.

Coal India target prices

Elara Securities said suggested 'Accumulate' with a higher target price of Rs 522 on Coal India from Rs 458 earlier. It said rising acceptance of coal as a dominant fuel mix and good volume delivery in the past few quarters, better evacuation infrastructure in terms of first-mile connectivity projects, healthy balance sheet, and likely annual dividend payout of Rs 26-27/share are long-term tailwinds for the stock.

"We retain Accumulate with a higher target of Rs 522 from Rs 458, based on 6 times FY28 EV/Ebitda. We have revised our target price on expected improvement in production volumes in FY27 on rising power demand. We have revised our earnings estimate by 7.6 per cent/13.7 per cent in FY27E/FY28E on account of better e-auction realisations. We introduce FY29E earnings estimate.

In the absence of cost-effective and sustainable fuel sources, Coal India is expected to remain the dominant fuel in India’s fuel mix in the medium term, as it offers reliability and stable supply, said HDFC Securities. It finds the volume outlook for Coal India robust and said healthy e-auction premiums and lower costs make Coal India's outlook positive.

"Strong summer demand and weak rainfall could help power demand and volumes rise in FY27, while higher global coal prices could support e-auction realisations. Coal India is expected to maintain a strong cash balance, adjusted for high capex and dividend payouts, and this strong cash flow could lead to a re-rating for Coal India over the next few years," it said while suggesting a 'Hold' on the stock with a bull case target of Rs 500 in the next four quarters.

Anand Rathi said Coal India, which dispatched 84 per cent to power sector (including CPPs), is expected benefit with rise in incremental power demand. It believes, Coal India is on track to register 800 million tonne volume in FY27e. "We maintain Buy on the stock with a revised target of Rs 520, valuing it at 6 times FY28e EV/Ebitda," it said.

EMkay Global said while e-auction premiums moderated QoQ in Q4 due to lower reserve prices despite firm global coal trends, it expects 55 per cent premium sustenance and factor in 6 per cent volume CAGR over FY27-28E. It maintained 'ADD' on Coal India with unchanged target of Rs 475.