Dividend-dependent investors in the Asia-Pacific region were well rewarded last year, with Australia’s benchmark index offering the highest yield among developed countries and Singapore providing nearly ubiquitous payouts, reported Bloomberg recently.

Singapore and the Philippines led the world in the proportion of their bellwether companies that made or pledged dividend payments, with about 97 per cent of companies in both Singapore’s Straits Times Index and the Philippine Stock Exchange PSEi Index having an ex-dividend date for the 12 months through December 31, according to an analysis of about 70 national equity benchmarks by Bloomberg .

In fact, eight of the top nine markets with the most prevalent payout ratios were from Asia Pacific, with South Africa the outlier. Thailand, Hong Kong, India (93.5 per cent of BSE Sensex companies), Malaysia, Australia and China were the other leaders, with more than 90 per cent of companies in their benchmark gauges offering dividends.

21% pays nil dividend

Though the study was done on the top 30 companies, it would be interesting to know whether the picture will be the same for BSE 500 companies?

According to a study conducted by proxy advisory firm Institutional Investor Advisory Services (IiAS), in FY16, 21 per cent of BSE 500 companies had not paid dividends to investors.

However, this is set to change as SEBI pressurises companies to clearly articulate their distribution policies. In July 2016, SEBI had made it mandatory for the top 500 listed companies to formulate and disclose a ‘dividend distribution policy’. The policy had to state the circumstances under which the shareholders of the listed entities may or may not expect dividend; the financial parameters that should be considered; internal and external factors; policy as to how the retained earnings should be utilised; and parameters that should be adopted with regard to various classes of shares. However, the key question is will India Inc increase its dividend payouts in sync with growth in its profits? The study by IiAS had revealed that many companies still prefer to remain stingy despite strong profit growth.

Confidence-building exercise

With fixed deposit rates remaining unattractive, retail investors need better dividend compensation from India Inc that could help them meet their routine expenses. Besides that, investor confidence in a company which pays consistent and rising dividends is also higher — a signal that the investor is invested in a firm that generates consistent cash flow.

Will India Inc oblige?

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