NTPC Ltd. could be heading for an unusual dividend year. The power producer's earnings per share are expected to fall in FY27, while its dividend is forecast to rise, according to Bloomberg data.
The contrast matters because the historical data shows only one previous year in which NTPC's EPS declined from the preceding year. That was FY20, when the dividend also fell short of Bloomberg's estimate.
The FY27 forecast points to a different outcome. NTPC's dividend is expected to rise even as EPS declines, putting the focus on whether the company can break from the pattern seen in the earlier EPS decline.
Record Payout
Bloomberg's FY27 consensus puts NTPC's dividend at Rs 9.42 per share, compared with Rs 9 in FY26. That would take the annual payout to a new high in the FY18-FY26 historical series provided.
The forecast comes as EPS is expected to fall to Rs 26.07 in FY27 from Rs 27.90 in FY26. That represents a 6.6% decline.
At the same time, the dividend is forecast to rise 4.7%.
The difference becomes clearer when the payout ratio is considered. Bloomberg's estimates imply that NTPC would distribute 36.11% of its earnings as dividends in FY27, compared with 32.26% in FY26.
The higher payout ratio means the dividend can rise even as EPS declines.
Past Pattern
The last time NTPC's EPS fell in the historical data provided, the dividend outcome was different.
In FY20, EPS declined to Rs 11.72 from Rs 12.77 in FY19. Bloomberg had estimated a dividend of Rs 5.49 per share for the year. NTPC's actual dividend was Rs 3.15.
The actual payout therefore missed the Bloomberg estimate by Rs 2.34, or about 42.6%.
That makes FY20 the key reference point for the FY27 forecast. If the current consensus plays out, NTPC would again report a decline in EPS, but its dividend would move higher rather than fall short of the Bloomberg estimate.
The table shows why FY27 is different. FY20 was the only historical year in the dataset when EPS declined. In that year, NTPC's dividend also missed Bloomberg's estimate.
FY27 would present the opposite dividend outcome if the current consensus is met.
Dividend Trail
NTPC's dividend has risen through most of the period covered by the data, despite fluctuations in the pace of earnings growth.
The company paid Rs 4.08 per share in FY18, followed by Rs 5.97 in FY19. The dividend fell to Rs 3.15 in FY20 before rising to Rs 6.15 in FY21.
It then increased to Rs 7 in FY22, Rs 7.25 in FY23, Rs 7.75 in FY24, Rs 8.35 in FY25 and Rs 9 in FY26.
Bloomberg's Rs 9.42 FY27 estimate would extend that increase.
The FY27 forecast therefore combines two developments that have not occurred together in the historical data: a decline in EPS and an increase in the dividend.
Earnings Gap
The FY27 estimates show a clear divergence between earnings and the dividend.
EPS is expected to fall 6.6% to Rs 26.07, while the dividend is forecast to rise 4.7% to Rs 9.42.
That would lift the estimated payout ratio to 36.11% from 32.26% in FY26.
The FY27 payout ratio would still be below the levels seen in several earlier years. It stood at 40.04% in FY18, 39.50% in FY19, 37.79% in FY21, 40.70% in FY22 and 41.57% in FY23.
Bloomberg's data also points to continued dividend growth, with projected three-year dividend growth of 6.70%.
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Yield Check
The higher dividend does not translate into a sharp change in NTPC's dividend yield.
The current 12-month dividend yield is 2.62%, compared with a five-year average of 2.52%. Bloomberg's projected 12-month yield is 2.82%.
The projected yield is therefore above the five-year average, but the difference is modest.
The more significant change in the FY27 forecast is the relationship between EPS and the dividend: earnings are expected to fall while the payout is expected to rise.
Estimate Range
The Rs 9.42 dividend is a consensus forecast, not a declared payout.
Bloomberg's estimate is based on 17 analyst forecasts. The estimates range from Rs 7.36 to Rs 11.30 per share.
The range shows that there is a meaningful difference between the lowest and highest forecasts. The Rs 9.42 figure should therefore be treated as the current consensus rather than a fixed outcome.
If the forecast plays out, FY27 would mark a change from NTPC's previous EPS-decline year. In FY20, lower EPS was accompanied by a dividend that missed Bloomberg's estimate.
This time, EPS is expected to fall again, but the dividend is forecast to rise to Rs 9.42.
The question for FY27 is whether NTPC can buck that past trend.
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