Nirlon, a commercial real estate player, has an ROE of 51%, a dividend yield of 5% and trades at an inexpensive P/E of 19 times.

While Nirlon may seem to offer a sweet deal of steady dividends plus capital appreciation, several factors work against its investment case.

It pays high dividends only because it’s a matured business. After Nirlon Knowledge Park, it has no plans to develop any new projects.

Its net profit is stagnating, and it expects growth to come only from new tenants and renewal of rent and lease agreements.

As it's a divided stock, we compared it with a fixed deposit investment to check if it's worth your money.

At 100% dividend payout, you will earn Nirlon’s net profit of Rs 1,189 crore in 5 years (assuming a 5% annual PAT growth from a 15% rent hike every 3 years).

An 8% fixed deposit will return Rs 1,552 crore in 5 years on the same investment as done in Nirlon. All this while your principal remains safe.

It is wiser to invest in a relatively safer fixed deposit rather than Nirlon until it has plans to expand its business. Read the full story on the link below.