As many as 15 companies including Infosys, HDFC Bank and Tata Steel are likely to distribute a higher share of their profits as dividend to shareholders, according to proxy advisory firm IiAS. In a report released today, IiAS said that companies have been hoarding cash and this has plagued corporate India for long. 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. Based on an analysis of the Nifty’s 100 companies, the report said that 91 of the top 100 firms have a published dividend distribution policy.
Further, 49 firms have a disclosed target payout ratio. Of these, 20 listed state-owned enterprises are required to follow the Government of India’s 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.
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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.