Companies
Shareholders got record-high dividends in FY24. Will the trend continue?
Summary
- Indian companies have doled out record-high dividends of ₹2.2 trillion in the last fiscal year, registering a 12.1% year-on-year rise
Indian companies are shelling out a larger chunk of their profits than ever before and rewarding their shareholders with greater dividends. Fiscal year 2024 witnessed a 12% year-on-year rise in dividend payouts, reaching a record high of ₹ 2.2 trillion in at least six years. A Mint analysis of 132 companies whose data for 2023-24 was available shows a steady increase in dividend payout ratios over the past six years. During the fiscal year, the payout ratio reached a little over 59%, exceeding the previous five-year average of 54.8%.
For the second consecutive year, the growth in the largesse has outpaced the companies’ bottom line growth– while net profits witnessed a modest single-digit increase of 9.3%, dividend payouts surged at a double-digit rate, the data showed.
“The current trend of rising dividend payouts is likely to continue in the coming years. With sustained economic growth, improving corporate profitability, and prudent financial management by companies, there remains a positive outlook for shareholders benefiting from increased dividend distributions," said Arvinder Singh Nanda, senior vice president, Master Capital Services Ltd.
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Some of the biggest dividend payers in 2023-24 include Vedanta, Tata Consultancy Services, and public sector firms such as Oil and Natural Gas Corp. and Power Grid Corp. of India. The metal and mining major Vedanta led the pack with a hefty ₹ 54,402 crore payout. This was followed by TCS ( ₹ 26,486 crore), Infosys ( ₹ 19,093 crore) and ITC ( ₹ 17,163).
“This financial year (FY24), companies with healthy profits rewarded investors by paying dividends. The trend is expected to be similar this year, with no immediate increase anticipated," said Abhilash Pagaria, head, Nuvama Alternative and Quantitative Research.
“Vedanta could pay higher dividends mainly because it received dividends from Hindustan Zinc. The information technology (IT) and public sector undertaking (PSU) sector should continue to deliver dividends this year as well," he added.
This underscores the PSU segment’s role in dividend payouts. While their contribution dipped slightly in 2019-20, it has steadily climbed since then. In 2023-24, PSUs contributed 23% to the total dividend pool, showcasing their unwavering efforts to share the bounties.
“The revival in PSU and government owned companies is real. The reason is increase in capital efficiency along with optimal capacity utilisation. This has led to higher profits from PSU sectors with enough provision kept for future expansion,"said Anand K. Rathi, co-founder of Mira Money.
“This has also been led by an increase in exports for a few industries. This trend will continue till PSU takes the mantle of expansion. On the other hand, the private sector had stayed conservative both on expansion and holding up cash for future expansion, hence lesser dividends," he added.
This generous trend spanned across various industries, with sectors like metals, IT, banking, financial services and insurance firms (BFSI) and consumer goods witnessing a significant surge in dividend distribution.
The broad nine major sectors tracked by Mint showed metals and IT firms handsomely rewarding their shareholders with payouts worth ₹54,530 crore and ₹ 49,062 crore. Other sectors like BFSI, FMCG, oil & gas, and power also made significant contributions.
Also Read: State-run banks have had a good year. Now for the dividends.
