Corporate India has been unable to declare higher dividends to their shareholders in 2008-09. An FE survey of 595 big companies finds that the aggregate dividend pay-out decreased marginally by 2.6% from Rs 31,632 crore in 2007-08 to Rs 30,813 crore in 2008-09. The aggregate net profits of the sample companies during the same period decreased by 2.9% from Rs 1.37 lakh crore to Rs 1.33 lakh crore. However, dividend payout or the dividend to net profit ratio has marginally increased from 23.15% in 2007-08 to 23.22% in 2008-09.
The companies were selected randomly with the only condition being that they paid dividend in 2008-09. Kishor P Ostwal, CMD, CNI Research, said, ?The year 2008-09 was the most difficult and challenging year for corporate India simply because the shock of global melt down came at a wrong time. There was huge price correction in commodities that has affected each and every business due to huge inventory losses coupled with currency losses. The recession has shaken the entire corporate world and cash flows have been very badly affected. Only PSUs and a few large cap companies maintained dividend stream. Mid cap was largely affected and due to stretched cash flows they had no alternative than to reduce the dividend.?
With regards to ?rate of dividend? that is calculated on the face value of the share, Colgate Palmolive topped the list of top five companies with 1500%, followed by TCS (1400%), EID Parry (1000%), Hero Honda Motor (1000%) and Astrazeneca Pharma (750%). Among the 559 dividend-paying companies 193 raised the rates of dividend, 176 paid lower rates and 190 maintained their levels in 2008-09 as compared with 2007-08. Coromandal Fertilisers, Cummins India, Britannia Industries, Jindal Steel and VST Industries are among the 193 companies who raised their dividend payment significantly during 2008-09. Coromandel Fertilisers PAT for the year 2008-09 also showed a quantum leap to Rs 496.38 crore during 2008-09 compared to Rs 209.76 crore in the previous year.
On the other hand, companies that reduced their dividend rate significantly during 2008-09 are Larsen & Toubro, Lakshmi Machine Works, NMDC, Sesa Goa, Infosys Technologies and Madras Cements. In the case of these companies like Lakshmi Machine Works net profit decreased by 55.9% to Rs 106.93 crore during 2008-09 from the figure of Rs 242.30 crore during 2007-08.
Among the 30 industries studied, 23 distributed dividend payouts at the rate of less than 30%. Fertilizers and electricity sector recorded a ratio in the range of 30% to 40%, while three industries namely cigarettes, food & products and personal care recorded more than 40%.
Moreover, industries like chemicals, cigarettes, electric equipment, fertilizers, food & products, pharmaceuticals, refineries, telecommunications and trading were able to increase dividend payments in line with an increase in net profit. On the other hand aluminium, cement, IT, construction, electronics, entertainment, hotels, personal care, shipping and steel saw their net profits and dividends declined in 2008-09.