Indian Companies Turn Generous, Step Up Dividend Payout
As many as 15 companies including Infosys Ltd., HDFC Bank Ltd. and Tata Steel Ltd. are likely to distribute a higher share of their profits as dividend to shareholders, according to proxy advisory firm IiAS.
The findings come at a time when there are demands from certain quarters that companies should reward investors by way of higher dividends and buybacks. "Cash hoarding has plagued corporate India for long,” IiAS said in a report released on Friday.
Based on an analysis of the Nifty's 100 companies, the report said:
- Ninety-one percent of the top 100 firms have a published dividend distribution policy.
- Forty nine firms have a disclosed target payout ratio.
- Of these, 20 listed state-owned enterprises are required to follow government guidelines on dividend payouts.
- The remaining 29 companies (non-public sector) have disclosed a targeted payout ratio in terms of either the company's profits, cash flows or networth.
"Of the 49 companies that have specified a target payout ratio, our analysis shows that 15 companies are likely to distribute a larger share of their profits as dividend going forward," IiAS noted.
Other companies that are likely to distribute a higher share of their profits as dividend are Bajaj Auto, Bajaj Finance, Glenmark, Petronet LNG, Dabur, Idea Cellular, UltraTech Cement, Dr Reddy's Laboratories, Motherson Sumi, Hindustan Zinc, Vedanta and Zee Entertainment Enterprises, it added.
"Bajaj Finserve, ICICI Prudential Life Insurance Company and Tata Motors appear to have rationalised their dividend payout ratios," the report noted.
IiAS believes that corporate India has come a long way in recognising the need to have a structured dividend policy. In doing so, investors stand to benefit.
"That almost half of the top 100 companies have specified a payout ratio shows not only corporate India's willing embrace of regulations, but also confidence in its ability to perform," it added.
As a good practice, IiAS advocates that companies must specify a dividend payout ratio, or a range of expected dividend payout (or buybacks).
In February, the proxy advisory firm had said that 88 listed companies can pay dividends worth Rs 27,600 crore but many continue to hold cash stockpile.
With a view to compelling companies to make discerning capital allocation decisions, SEBI made it mandatory for the top 500 listed companies to formulate and disclose a dividend distribution policy with effect from July 2016.
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