FMCG, IT and pharma sectors topped the list of those paying the highest dividends in FY12. If automobile were to be included, the dividend payout ratio for these sectors was more than 30%.
On a year-on-year basis, however, the payout ratio for three of these four sectors declined, which could have been the result of increased net earnings for sectors such as FMCG that saw a healthy 12% growth in its net profit compared to the last year.
As a company?s profitability grows over time, there could be instances when despite an increase in the absolute dividend amount, the payout might decline. On similar account, the aggregate dividend payout ratio of realty and pharma companies went up due to decline in their profits. The payout ratio is the dividend distributed as a percentage of net profit.
In absolute terms, however, banking, IT, power generation and auto sectors were the biggest distributor of dividends. Banking and IT companies from the BSE 500 universe distributed dividends worth R13,200 crore and R10,200 crore, respectively. Power distributor and generators and automakers, on the other hand, gave out dividends amounting to R5,517 crore and R6,935 crore, in that order. Barring auto companies, the dividend distribution for these top distributors observed a growth of 10-19%.
In a year when the capex growth fell to its five-year low of 13%, the dividend distribution of 399 companies from the BSE 500 universe went up 12%. The aggregate dividends paid by these companies from across 21 sectors, stood at R92,454 crore in FY12. Indian companies are traditionally known to pay lower dividends than their western counterparts , as they conserve cash for capacity expansion.
However, in an uncertain economic environment, companies postpone their capex plans till market conditions improve. Small-to-mid-sized manufacturers also utilise a portion of their earnings to raise working capital.
?Corporates look to reserve cash and maintain strong cash balance sheets in difficult times. Even if they postpone their capex plans, that doesn’t lead to an increase in dividend payout,? said Dipen Shah, head of research at Kotak Securities.