MNCs score over Indian companies in dividend payout, rate of payment

Written by Pradip Kumar Dey | Mumbai | Updated: Dec 19 2008, 07:07am hrs
Multinational companies (MNCs) bettered the dividend paid to their shareholders during the current fiscal over the previous one by around 22%, a study by FE has revealed.

MNCs rate of dividend payment was also higher than that of Indian companies.

A study of 50 major MNCs revealed that while the dividend paid to shareholders increased 20.4% in 2006-07, it was up 22.6% in 2007-08.

The study has also revealed that MNCs as well as Indian companies showed a steady decrease in the dividend-payout ratio in 2007-08 over that of 2005-06. The aggregate total net profit of MNCs increased 31.6% in 2006-07 (from Rs 10,000 crore in 2005-06 to Rs 13,168 crore in 2006-07) and 23.9% in 2007-08 (to Rs 16,318 crore).

Their total equity dividend also increased by 20.4% to Rs 5,265 crore in 2006-07 and 22.6% to Rs 6,457 crore in 2007-08. The equity dividend to net profit ratio decreased steadily from 43.71% to 39.57% during the study period. This is significant, given the fact that despite a higher profit growth, MNCs have not succeeded in increasing the dividend-payout ratio.

Among the 50 MNCs that constituted the study, a significant rise in the dividend rate was noticed in the case of Hind Unilever, Siemens, Bosch, Castrol (I) and Colgate Palmolive.

Corporate India, on the other hand, fares poorly with regards to returns for investors. The total dividend payment of 50 Indian companies increased 23.7% in 2006-07 to Rs 27,031 crore; it further increased 5.3% to Rs 28,469 crore in 2007-08.

The aggregate total net profit of 50 Indian companies that constituted the study increased 39.5% in 2006-07 and 20.2% in 2007-08.

The equity dividend to net profit ratio for Indian companies steadily decreased from 29.11% to 22.63% during the study period.

On the basis of the average rate of equity dividend (annualised equity dividend as percentage of paid-up equity capital), the top five companies in 2007-08 are TCS, Hero Honda Motors, Larsen & Toubro, Infosys Technologies and Jindal Steel.