Did some companies use retained earnings for higher dividend amount? Look at the dividend payout and yield of the past years

Sun, Sep 15, 2019 4:59 PM on Dividend, Bonus & Rights, Exclusive,

In the stock market, the players declare hefty dividend amounts as a percentage of the existing paid up capital of the company. However, it is equally important to know the dividend payout from net profits to track how much of the profit does a company retain and how much of it is paid out as dividend. Some companies have consistently maintained the payout ratio, while some companies have fluctuated these ratios in order to show growth in the amount of dividend paid out.

Similarly, another important factor to be considered is the dividend yield. The yield is obtained by dividing the dividend per share by the price of that share. The yield gives an idea regarding the return generated on the existing price of the company. It shows the percentage of reward on the basis of the market price of the company’s stocks.

For this purpose, a list has been compiled that shows the dividend payout and yield of the companies that have declared dividends for FY 75/76. Moreover, it has been compared with that of past two years to analyze the existence of a particular pattern. To arrive at the dividend payout, the amount of dividend and net profit for that period was divided. Similarly, for dividend yield, the dividend declared for the last two years was taken into consideration. The dividend per share was divided with the LTP of the stock one day prior to the book closure date.

Dividend Payout

*Net profit and dividend amount in Crore

As we can see, some companies have opted to distribute dividend out of retained earnings in order to maintain the amount paid out as dividend which has helped in keeping the prices of the stock inflated. While companies have used dividend as a means to influence the stock prices, others have actually performed exceptionally well and consistently retained profits for unforeseen circumstances. Also, in only few cases, the amount of dividend has fallen from that of the previous year.

Dividend Yield

Similarly, in most of the cases, the dividend yield has increased as a result of increase in dividend amount and fall in the prices of the stocks. Since, the companies have not closed their books for the dividends of FY 75/76, the LTP of the stock before book closure date cannot be determined.