Payout time: When dividend is the cherry on the ice-cream
It is one of the cheeriest forms of making capital out of the market. Promoters of some of India’s best-known companies that have been regularly rewarding their shareholders with hefty dividends have themselves been taking home megabucks from the dividend payoouts
Take Hero MotoCorp for instance. It announced a hefty interim dividend payment of Rs 55 per share equity share of Rs 2 face value amounting to a 2,750 per cent dividend payout for the financial year 2016-17. This was starting the dividend payout season in style considering that the dividend amount per share was higher compared to Rs 40 per share interim dividend in March last year.
For the promoters, Pawan Munjal and family, this was serious money. The high dividend meant that they would take home Rs 380.41 crore besides the final dividend amount later this year. Last year, they earned a dividend of Rs 498.03 crore. Naturally, this has added to the festive season cheer for the shareholders of Hero MotoCorp against the backdrop of the Holi celebrations on Monday.
Most promoters are seeing a rise in their dividend payouts over the last five years. Hindustan Zinc promoters – Anil Agarwal owns over 64 per cent in the company – earned a hefty dividend last year as the company announced a special one-time dividend pay out of Rs 24 per share fetching the promoters a total dividend of Rs 7,625 crore in 2016 compared to just Rs 658.34 crore in 2012.

A sharp rise
Most of the promoters have seen their share of dividend as promoter shareholder rise by leaps and bounds over the last five years as their profit has risen as Tata Sons promoted Tata Consultancy Services saw promoters share in dividend rise from Rs 3,615.95 crore in 2012 to Rs 6,293.10 crore in 2016.
Siemens, the German multinational firm which holds a 75 per cent stake in the company, has taken home a dividend of Rs 894.75 crore in 2016 compared to just Rs 158.4 crore in 2012. Maruti Suzuki promoters – the Suzuki family owns a stake of over 56 per cent in the company – are taking home a higher dividend of Rs 594.30 crore in 2016 as against Rs 117.47 crore in 2012.
Some companies like Tech Mahindra, which acquired the businesses of Satyam Computer, have seen a multi-fold rise in dividend payout due to their capital investment. It rose from Rs 24.46 crore in 2012 to Rs 423.30 crore in 2016.
Reliance Industries promoted by Mukesh Ambani has seen a comparatively humble rise in dividend payout to promoters from Rs 1,132 crore in 2012 to Rs 1,440 crore in 2016 as they have been ploughing back their profits in the retail and telecom ventures.
In case of information technology companies, the dividend has been rising for promoters/ founders like TCS, Infosys and HCL technologies.
HCL Technologies promoter Shiv Nadar family took home a dividend of Rs 1,359.60 crore in 2016 compared to Rs 529.47 crore in 2012, a rise of nearly two-and-a-half times.
Bajaj Auto, another company where the promoters’ share of dividend has not seen a sharp rise – it stands at Rs 784.61 in 2016 as compared to Rs 651.33 crore in 2012.
Meanwhile, Wipro promoter Azim Premji took home a dividend of Rs 1,087.11 crore compared to Rs 1,156.70 crore in 2012 as he reduced the promoter stake in the company to 73.34 per cent from 78.41 per cent as a requirement by the regulator of minimum public shareholding of 25 per cent to be maintained in all the listed companies.
From retail investor perspective good dividend paying companies may not always be the best companies to invest.
Ajay Kejriwal, president, Choice Broking said, “Dividend is synonymous to the cherry on the ice-cream, while the ice-cream itself is in the form of capital appreciation. Investors must not walk in the dividend shadow particularly in light of those announced by some public sector companies, which can be deceptive.”
“Average dividend yield of Sensex/Nifty stocks is below 2 per cent and the objective of equity investment is all about capital appreciation else annual yields in debt or money funds would be the option that investors can explore,” said Kejriwal.
The share price of most high dividend paying companies are volatile in the short term as they ride the dividend pay out record date announcement.

How it works
Top dividend paying companies have not given high returns on their share price, an analysis of data supplied by Capital line showed. In fact, higher returns in terms of share price have come from high dividend yield companies. The Top 10 companies by dividend amount paid gave a five-year return in the the range of 41.64 per cent to 245.91 per cent. Infosys Technologies’ five year return at 41.64 per cent was the lowest between 2012 to 2016. HCL Technologies gave a return of 245.91 per cent in the same period. TCS has given five-year return of 109.69 per cent and has, therefore, been a good dividend payer while it has seen capital appreciation. ICICI Bank has been another laggard with a five-year return of 60.28 per cent compared to HDFC, the promoter of HDFC Bank’s return of 168.99 per cent.
Reliance Industries has given a return of 71.35 per cent in the last five-year period, ITC has given a return of 88.88 per cent, and Hindustan Unilever of 127.06 per cent.
Shareholders of oil marketing companies, FMCG companies, IT consulting and software companies and automobile companies are lucky these days as companies in these sectors are in the forefront in sharing their profit through regular dividend pay out. As it has turned out, oil marketing companies have emerged as good dividend payers in recent years.
Dividend payout by Indian Oil Corporation, HPCL, BPCL and Oil India, along with issue of bonus shares, has been rewarding for the public shareholders as well their promoter, the Government of India. In fact, the oil marketing companies have outperformed the top dividend companies in their share price appreciation as Indian Oil Corporation has given a five year return of 177.22 per cent, BPCL has given a five-year return of 291.38 per cent and HPCL has given a five-year return 428.66 per cent.
raviranjan@mydigitalfc.com
Columnist: 
Ravi Ranjan Prasad
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