Balancing Act: With greater capex comes lower dividend
The dividend payout ratio is the proportion of a company's earnings paid to shareholders as dividends. This payout tends to be lower in times when companies spend more on expansion. Companies with a high cash flow in mature industries tend to have higher dividend payout ratios.
Mumbai: was less generous with dividends in FY24 than in previous 9 years amid an increase in with average capacity utilisation exceeding the long-term average. The was 34% in FY24, down from 43% in FY23 and 37% in FY22. Including buybacks, the payout was 38% in FY24 compared with 44% in FY23 or 41% in FY22.The payout ratio is the proportion of a company's earnings paid to shareholders as dividends. This payout tends to be lower in times when companies spend more on expansion. Companies with a high in mature industries tend to have higher dividend payout ratios. About 1,300 companies paid ₹4.15 lakh crore in dividends in FY24, compared with their standalone net profit of ₹12.24 lakh crore. Additionally, 41 companies spent around ₹50,750 crore on in FY24. The dividends paid in FY23 amounted to ₹4.44 lakh crore, while money spent on share buybacks was ₹21,500 crore.
According to analysts, investments in several new projects are gaining momentum, with companies allocating more funds toward expansion.
"After a long time, there is an uptick in capital expansion across many industries in India," said Gaurav Dua, head of capital market strategy, Sharekhan.
Agencies"Consequently, it is not surprising to see a decline in dividend outgo as the money would be required to fund the expansion," Dua said.
The top 15 industry houses in India paid an average of 43% of their profits as dividends in FY24, significantly lower than the 75% and 44% paid in the prior two fiscal years. The Tata Group led the list with a dividend payment of ₹32,000 crore, though this was 38% less than the previous year. (TCS) paid ₹42,090 crore in dividends in FY23 against ₹26,426 crore in FY24. Shiv Nadar's HCL Group paid ₹14,120 core in FY24, higher than ₹13,035 crore in FY23.
Anil Agarwal's Vedanta group paid around ₹11,000 crore in FY24, marking an 84% decrease from the previous year's dividends of ₹69,997 crore. The payout ratio of the Mahindra and Bajaj groups dropped marginally in FY24. On the other hand, those of the Bharti Group, Aditya Birla Group, , Hinduja Group and Torrent rose substantially.
"With the stock market creating enormous wealth over the last year, many promoters, instead of giving dividends, allocated more funds for capital expenditure," said G Chokkalingam, founder and CEO, Equinomics Research. "Additionally, some large companies rewarded shareholders through buybacks instead of dividends in FY24."
At a recent NCAER event, chief economic advisor V Anantha Nageswaran noted a drawing down of surplus by the private sector, indicating a recovery in private capex. Private proposals sanctioned by banks rose by nearly ₹1 lakh crore to ₹3 lakh crore in FY24, according to India Ratings and Research.
Source: Stocks-Markets-Economic Times
