With Pakistan Stock Exchange giving jolts to the Investors, overall sentiments remain bearish amid macro economic headwinds and Political Noise.

Benchmark KSE100 index has already lost 4,800 points since 1-Year high level of 48,726 achieved in June-2021, down by 10 percent. Many blue-chip stocks are down 30% to 50% as changing economic situation warrants re-assessment of financial profile of these companies.

Cement sector stocks remained severely battered as high coal prices and somewhat subdued demand projections led Investors to reduce their exposures. Even well diversified cement stock such as Lucky Cement also felt the heat and went down 25 percent.

While many investors have already diversified away in Gold, Fixed Income and Alternate Investments, Some Investors have found solace in High dividend Yielding stocks in the same stock market.

With Commercial Banks providing hefty Dividend Yield, the future outlook remain cloudy with implementation of IFRS 9, Its impact on Profits and Capital Adequacy of Banks, and expected increase in NPLs with stagnant economy.

The only sector with charm left is Fertilizer Sector with Urea offtake marking significant growth. February-2022 urea offtake for the touched 530,000 MT, rising by 30%YoY, primarily due to higher inventory in anticipation of hike in urea prices amid implementation of WACOG mechanism. Farmers accumulate Fertilizer ahead of Kharif season.

The Fertilizer Sector remain Investors most favored sector due to stable urea demand outlook (~6mn tons) and strong pricing power where manufacturers’ should be able to pass on incremental costs. This is further favored by low inventory levels and cheaper domestic urea prices compared to imported urea prices.

Two fertilizer stocks remain in limelight; Fauji Fertilizer Company (FFC) and Engro Fertilizer (EFERT). FFC has gained 17.5 percent in last six months while EFERT has gained 33 percent in the same period.

Inflows suggested that Mutual Funds, Corporates and Individuals invested ~$48mn (Net Buy) in the Fertilizer sector in last six month.

According to AKD Securities, Engro Fertilizer has an attractive dividend yield of 16.6%/17.7% for 2022/2023. Similarly, Fauji Fertilizer is offering 14% Dividend Yield, making these stocks one of the highest Dividend Yielding stocks in the whole market and providing cushion from Market Volatility.

Despite a providing a good runup, FFC and EFERT still provide hefty dividend yield amid rising offtake scenario. These stocks are likely to remain in the limelight in near term.

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