When it comes to selecting an investment vehicle for the future, there are a plethora of options, catering to a wide demographic of investors. Investment refers to the purchase of assets, intending to generate an additional income or appreciation of wealth. The investment schemes are always oriented towards future returns, keeping in mind maximum capital appreciation and minimum capital risk. One such investment option that allows investors to earn healthy returns, if invested in wisely, is the share market.
Now, in the share market too, not all companies have the potential to give healthy returns to their investors, only companies that have strong corporate governance policies, have consistent financial performance, have fortified upper management and possess an economic moat reward their investors.
One of India’s pioneers in the private sector has come a long way in this regard, is the Indian Tobacco Company (ITC). It has a market capitalisation of $US 50 billion and a gross sales value of $US 10.8 billion. There has been a decent growth keeping in mind what ITC share price was in the last 10 years and ITC ‘s share price today. The short-term investments in the markets have often been subjected to the perils of volatility. However, fluctuations have been sustained with time. This can be very well analyzed if we compare ITC share price today which is INR 235.80 and ITC share price on December 18, 2020, which escalated to INR 245.15. The important question that needs to be answered is, whether it’s a wise decision to select ITC for a long term investment?
Here are some reasons to invest in ITC For The Long Term.
The company has made an effort to reduce its dependence on cigarettes. It has been effectively able to channelise all its funds generated from the business of cigarettes, in other fast-growing sectors like FMCG, Agri products, and hospitality chains. Almost fifteen years back, the company was generating its bulk revenue of around 80 per cent from tobacco productions. The contribution was less than half and contributed 45. 8 per cent in the gross revenue of FY 2019. Other segments in FMCG like food, apparel, consumer goods and stationary witnessed a phenomenal growth and generated sales of INR 12,500 crore in FY 2019. This gives a clear indication that ITC stock price in future is sure to soar high, as they continue diversifying their product suite.
Be it any sector like FMCG, Paperboard, Food, Stationery, Agri, Personal Care Products, and Hospitality, each of these industries will add more resources in which the investments are made. This, in turn, will help the investors to derive benefits from ITC for a long term investment.
ITC has also achieved leadership in all the business ventures it had explored in India. It has occupied a front runner position in the tobacco and paper business of the country. The multinational conglomerate also sells about 81 percent cigarettes and bidi in the entire Asia. Its hotel chain business has occupied a significant position among the top three players. In the FMCG sector, ITC share price has been capturing the market in high clutter categories like noodles, biscuits, salty snacks and personal care products. In the upcoming years, ITC has also planned to amplify its Dairy Products on a large scale.
If we deep dive into the last thirty years track record of ITC, then it has rewarded its shareholders generously. The ITC stock price has accelerated from trading at INR 1 in the year 1991 to now trending at INR 235.80. During this period the company has disbursed out cumulative dividends of more than INR 19,000 crore to its shareholders. In between the company has also announced bonuses in years like 1991, 1994, 2005, 2001 and 2016. ITC share price history for the last 10 years showed an upward trend with a value almost hitting 2.8 times in the current phase.
The overall benefits of investing in companies for a long term.
Compounding effect gives an edge
Long term investing can offer substantial gains, leveraging the power of compounding. The dividends that get reinvested earn returns on the increased invested amount and go a long way in steady wealth accumulation.
Predictions are mostly on a positive side
Investing for the long term reduces the impact of short term market volatility and evens out the risks. Most successful investors who invest in high quality stocks are aware of the benefits of allowing their investments to mature and hence keep a long term perspective while investing.
It spares you from anxiety
The long-term investment is also good for your health. The rapid and volatile market troughs and crests will not bother you constantly, which has to be monitored otherwise in the short-term plans. It is no surprise as history projects that successful investors are the players from long-term schemes.
To take the final notes, the ITC company is renowned for favouring long-term investors. ITC is among the enterprises that are typically low beta stock that means low volatile stock. The non-cigarette business has grown 21-fold ever since 1996. In the FMCG sector, it has high returns on capital and an excellent capital management cycle. It has explored a long way to establish itself as one of the reputed brands in India. These are some of the aspects that investors seek when they spend in long-term stocks.
