The Hindu Business Line : Dividends lag behind earnings; pay-out flat

CORPORATE India may not be in the mood to fully loosen its purse strings, despite a good earnings season for the top companies. For 108 companies (constituents of BSE 200), which have announced dividends in 2003-04, the dividend growth of 23 per cent (excluding one-time dividends) has lagged behind the earnings growth of 31 per cent.

What has perked up the dividend picture for Corporate India are a couple of eye-popping dividends from Infosys and Wipro. For instance, Infosys Technologies declared a dividend of Rs 129.5 per share during 2003-04 vis-à-vis Rs 27 per share in the previous year.

The growth in dividends clearly outpaced the earnings growth of 31 per cent by a wide margin.

But this has been an exception rather than a trend.

For a good number of companies such as GSK Pharma, Grasim Industries, Goodlass Nerolac, Novartis India and Satyam Computer, the growth in dividends has been lower than earnings. For instance, the dividends of Grasim Industries grew by 40 per cent, as against its earnings growth of 119 per cent.

For a sample of 108 companies, the other key findings are:

Dividend distribution has increased by 38 per cent from Rs 8,328 crore in 2002-03 to Rs 11,484 crore in 2003-04. This, however, includes one-time dividends. Excluding these, dividends have grown by about 23 per cent to Rs 10,236 crore. The growth in dividends was higher during 2002-03 at 29 per cent.

Dividend pay-out of these companies has also lagged. On an average, dividend pay out ratio has declined from 27.4 per cent in 2002-03 to 24.7 per cent in 2003-04.

Following a sharp rise in stock price over the past year, the dividend yields have come down in 2003-04. Some of the stocks, which have dividend yields in excess of 5 per cent are Abbott India, ICI India, Clariant India, Blue Star, GE Shipping and SRF.

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