Stocks

SEBI’s articulated dividend policy sets the tone for more payouts: IiAS

Our Bureau Mumbai | Updated on January 13, 2018 Published on February 23, 2017

‘MRF, 6 others can pay dividends of over ₹100 a share’

There are 88 companies that can pay about ₹27,600 crore in dividends, proxy advisor IiAS has found, based on its study of the FY16 financials of BSE 500 companies. This is higher than the amount of ₹21,300 crore IiAS identified in its 2016 study (based on FY15 financials). “We believe SEBI’s requirement of an articulated dividend policy will force companies to think more deeply about dividend payouts,” the advisory said. “Companies are clearly continuing to hold cash stockpiles and must consider paying higher dividends.”

The study concluded that seven companies — MRF, Eicher Motors, 3M India, Bosch, Maruti Suzuki India, ISGEC Heavy Engineering and Honeywell Automation India — can pay dividends of over ₹100 a share. Ten companies can pay dividend between ₹50 and ₹100 per share. Despite being profitable, Whirlpool of India (Whirlpool) has not paid dividend in the past four years. IiAS estimates that Whirlpool has ₹240 crore in excess distributable cash.

Highest payout ratios

OnMobile Global, Thomas Cook (India), Swan Energy, Titagarh Wagons and Akzo Nobel India had the highest dividend payout ratios in FY16, in the range of 195-340 per cent of the companies’ profit after tax.

“Following our continued push on dividend payouts,” IiAS noted, “in July 2016, SEBI made it mandatory for the top 500 listed companies to formulate and disclose a ‘dividend distribution policy’. The policy requires companies to disclose, among other points, the circumstances under which shareholders may or may not expect a dividend and a policy outlining how the retained earnings will be utilised.

While IiAS had advocated a ‘retention policy’ in its previous dividend report, SEBI’s dividend policy defines a similar framework. The regulation stops short of mandating a target payout ratio. However, we believe it strikes the right balance between ensuring predictability of returns for shareholders and allowing flexibility of investment plans for companies.”

Published on February 23, 2017
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