India Inc's combined dividend payout rises 6.5%
Published On: Tuesday, July 7, 2020 | By: Team KnowMyStock
The current dividend season has turned out to be unexpectedly generous despite a poor show by India Inc in the fourth quarter and fiscal year ended March 2020. The combined dividend payout by India’s top listed companies, which are part of the BSE500 Index, for FY20 was up 6.5 percent, the fastest growth in the past three years. And, equity investors should thank cash-rich biggies such as Tata Consultancy Services (TCS), ITC, Hindustan Unilever, Nestlé, and Bajaj Auto for this. However, excluding consumer and software services companies, dividend payout is down 17.6 percent year-on-year (YoY) to Rs 1.12 trillion in FY20, from Rs 1.36 trillion a year ago. In contrast, these firms had raised the payout by 5.3 percent in FY19.
In contrast, traditional large dividend payers such as private sector banks, insurers, oil & gas majors, and metal & mining companies either cut dividend payout in FY20 or skipped it altogether. Banks and insurers skipped dividend as advised by their regulator in view of the potential spike in bad loans due to the Covid-19 pandemic. This is the first dividend season since shareholders have been mandated to pay tax on their dividend income against the earlier rule of companies paying 20.56 per cent dividend distribution tax (DDT) on their payout.
Experts attribute the higher payout to the change in dividend law and cut in corporate income tax. “Now that dividend is taxed in the hands of shareholders, many companies pass on the savings on DDT to shareholders in the form of higher dividends per share,” said a expert.
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