The study and analysis of dividend policy trend of indian organizations

The study and Analysis of Dividend Policy Trend of Indian Organizations Mrs. Ranpreet Kaur Asst. prof –BVDU, IMED,pune Mb No-9730449505 Email Id-ranpreet.bvu@gmail.com Alternative E-mail id-ranpreet.kaur18@gmail.com

Publication DetailsASM’s INTERNATIONAL E-Journal on Ongoing Research in Management and IT" E-ISSN-2320-0065, INCON – X 2015 www.asmgroup.edu.in/incon/E%20.../Finance_2015/INCN15_FIN_036.pdf

Abstract Post liberalization due to integration and opening of world economies Organizations led to function in diverse economic situations in India. In the global village foreign players also entered in the domestic markets which escort to stiff competition and opportunity of making more option to the investors. Organizations encounters with complex situation as on one hand, they have to be defensive in the dividend decision to maintain financial recourses as so to defend from uncertainty and on the other side, the organizations have to follow aggressive dividend policy to attract and retain investors who have a ample option of investment. The financial manager comes across with decisive questions and confront of retention and payout decisions in the post liberalization period. It happens to subject matter of study how Indian organizations adapt themselves to the changed situation and decide the dividend amount. This research paper is an attempt to analyze the dividend payment trends due to transformation in organization perspective and competition in post globalized period. The study is sourced by creative and critical analysis of research papers and news articles. Research can assist to throw light on changing state of dividend decision which can facilitate individuals to make decision of investment in equity.

KEYWORDSorganizations

Competition,

Dividend,

Dividend

decision,

liberalization,

IntroductionAfter globalization a lot of brisk Economies variations and fluctuations can be observed in the economic conditions and Share market. Due to uncertainty and fluctuations, Organizations always encounters with the dilemma and difficulty in deciding dividend proportion Since August 1996 to date the sensex gained 537% on Share price return basis which solitary consider into account market price movements of the index as per the studies and analysis done by S&P Dow Jones Indices (SPDJI). On the other hand, when the total return of sensex including return from market price movements and return from all dividends paid by each constituent stock are reinvested into the index constituents, the total gains shoot to 759%. This reflects the return in the sensex comes from dividend is approx 222%, or near to one third of the returns from investing in the sensex, since 1996.This alter in dividend reflects that organizations are focusing on dividend decisions as for optimum financial management and for the wealth maximization of the investors by paying dividend since retail Investors expect that their investment should generate the regular income as well as capital appreciation in the era of uncertainty and inflation.

This paper is an attempt to focus and explore on changing dividend state and trend i.e. dividend decision due to changing organization perspective.

The major objectives of the paper are1. To define and understand the notion of dividend.

2. To study and understand the dividend state in modern instant.

3. To analyze the drift of dividend payment.

Theoretical background – Dividend – It is defined as the proportion of earning to be distributed to the shareholders in proportion of their ownership.

Dividend can be also stated as –Distribution of earnings to shareholders in proportion to their investment in Organizations equity.

Dividend Policy – Dividend policy is the process of deciding the amount to be distributed to the shareholders out of organization profitability.

It can also be defined as – Amount or proportion for the shareholders in profit of the organization to be paid.

RESEARCH METHODOLOGY Researcher has referred secondary data for the research. Data is collected from secondary data sources like news articles, books, journals websites and research papers. NSE website and news articles are taken a major source for collection of companies past and current information.

Companies listed in National Stock exchange NIFTY and Bombay Stock Exchange SENSEX Index are considered as a major source for the research purpose. Last five year corporate action (dividend declaration) is taken for the research purpose.

DATA ANALYSIS – Among the Companies listed in NIFTY 37 companies paid total dividend of rs. approrx 500 crore and more during the financial year 2012-13.Among them Private sector companies like ITC,TCS and HUL are the highest dividend payer and in Public sector Undertakings ONGC,NTPC and Coal India are the top dividend payer. Even 11 companies named Oil India, IOC, Power Finance Corp; non-PSUs are Hindustan Zinc, Bharti Infratel and Indiabulls Housing Finance outside NIFTY have also paid good amount of dividend.

NIFTY(PSU) Coal India ONGC NTPC NON NIFTY (PSU) Oil India IOC Power Fin

FY 13 dividend (Rs cr) 8843

Private

8128 4741

ITC HUL Private

4148 4000

1803 1505 924

Hind Zinc Bharti Infratel Indiabulls Hsg Fin

1310 1002 625

Source Economics times

TCS

FY13 dividend (Rs Cr) 4306

Over the long run, dividend contribution is about 33 % of the return from equity. Due to rise in proportion of dividend income in overall equity return investor look for equities with sustainable and consistent dividend income.

Coal India Ltd. (Share price -360 (record date-09 Dec 2014))Coal India Limited is an Indian state-controlled coal mining organization headquartered in Kolkata, West Bengal, India. It is the largest coal producer organization in the world and contributes around 81% of the coal production in India.

Table-1: Dividend Declared Dividend Date Record Date Dividend % Interim / Final / Dividend 17 Jan 2014 20 Jan 2014 290 Interim 06 Sep 2013 11 Sep 2013 43 Final 18 Mar 2013 19 Mar 2013 97 Interim 06 Sep 2012 10 Sep 2012 5 Final 15 Mar 2012 17 Mar 2012 95 Interim From the above table it can be interpreted that coal India has fluctuating dividend payment schedule but good amount of dividend payment during Jan 2014 as paid approx 290 % dividend.

NTPC Ltd (Share price – 135(record date-09 Dec 2014))NTPC Limited is an Indian Central Public Sector Undertaking under the Ministry of Power, Government of India, engaged in the business of generation of electricity and allied activities.

Table-2: Dividend Declared Announcement Effective Dividend Dividend (%) Remarks Date Date Date 15/05/2014 13/08/2014 Final 17.5% Rs.1.7500 per share(17.5%)Final Dividend 17/01/2014 31/01/2014 Interim 40% Rs.4.0000 per share(40%)Interim Dividend Rs.0.7500 per share(7.5%)Final Dividend & 10/05/2013 05/09/2013 Final 20% Rs.1.2500 per share(12.5%)Special Dividend 18/02/2013 01/03/2013 Interim 37.5% Rs.3.7500 per share(37.5%)Interim Dividend 10/05/2012 06/09/2012 Final 5% Rs.0.50 per share(5%)Final Dividend 12/01/2012 31/01/2012 Interim 35% 10/05/2011 08/09/2011 Final 8% 18/01/2011 04/02/2011 Interim 30% 17/05/2010 08/09/2010 Final 8% 26/02/2010 18/03/2010 Interim 30% From the above table it can be stated that NTPC has good track record of dividend payment and even organization had increasing track record for 4 consecutive dividend payments.

State Bank of India (Share price – 312(record date-09 Dec 2014))-

State Bank of India is an Indian multinational, Public Sector banking and financial services organization. It is a government-owned corporation with its headquarters in Mumbai, Maharashtra.

Table-3: Dividend Declared Announcement Effective Dividend Dividend (%) Remarks Date Date Type 14-05-14 29-05-14 Final 150.00Rs.15.0000 per share(150%)Dividend 04-03-14 11-03-14 Interim 150.00Rs.15.0000 per share(150%)Interim Dividend 14-05-13 28-05-13 Final 415.00Rs.41.5000 per share(415%)Dividend 12-05-12 24-05-12 Final 350.0011-05-11 20-05-11 Final 300.0011-05-10 09-06-10 Final 200.0025-01-10 05-02-10 Interim 100.00 State Bank of India had last declared a dividend of 415.00% for the year ending March 2013.

SBI had track record of good dividend payment and they also had consistency in paying good amount of dividend.

Oil and Natural Gas Corporation (Share price – 360 (record date-09 Dec 2014))Oil and Natural Gas Corporation Limited is an Indian multinational oil and gas organization headquartered in Dehradun, India.

Table-4: Dividend Declared Announcement Effective Dividend Dividend (%) Remarks Date Date Type 04-03-14 27-03-14 Interim 85.00 Rs.4.2500 per share(85%)Second Interim Dividend 14-11-13 10-12-13 Interim 100.00 Rs.5.0000 per share(100%)Interim Dividend 29-05-13 17-09-13 Final 10.00 Rs.0.5000 per share(10%)Final Dividend 29-01-13 22-03-13 Interim 80.00 Rs.4.0000 per share(80%)Second Interim Dividend 04-12-12 24-12-12 Interim 100.00 Rs.5.0000 per share(100%)Interim Dividend 29-05-12 14-09-12 Final 40.00 Rs.2.00 per share(40%)Final Dividend 15-02-12 19-03-12 Interim 30.00 Rs.1.50 per share(30%)Second Interim Dividend 02-12-11 06-01-12 Interim 125.00 31-05-11 18-08-11 Final 15.00 Rs.0.75 per share(15%)Final Dividend 01-12-10 20-12-10 Interim 320.00 Special Interim Dividend 31-05-10 09-09-10 Final 150.00 Oil and Natural Gas Corporation Limited had declared good amount of interim dividend over the years. The Organization has a fine dividend track details and had consistently declared dividends for the last 5 years.

Bank of India (Share price – 283 (record date-09 Dec 2014))-

Bank of India is commercial bank with headquarters in Mumbai, Maharashtra, India. Founded in 1906, it has been government-owned since nationalization in 1969.

Table-5: Dividend Declared Announcement Effective Dividend Dividend (%) Date Date Type 13-01-14 23-01-14 Interim 50.00 13-05-13 20-06-13 Final 100.00 30-04-12 21-06-12 Final 70.00 02-05-11 07-07-11 Final 70.00 07-05-10 08-07-10 Final 70.00

Remarks Rs.5.0000 per share(50%)Interim Dividend Rs.10.0000 per share(100%)Dividend Rs.7.00 per share(70%)Dividend -

For the year ending March 2014, Bank of India has declared an equity dividend of 50.00% amounting to Rs 5 per share. From last five years organization had declared and paid good amount of dividend in interim as well as in final. The Organization has a good dividend track report and has consistently declared dividends for the last 5 years.

Tata Consultancy Services (Share price – 2507 (record date-09 Dec 2014))Tata Consultancy Services Limited is an Indian multinational information technology service, consulting and business solutions organization headquartered in Mumbai, Maharashtra. TCS operates in 46 countries. . Table-6: Dividend Declared Announcement Effective Dividend Dividend (%) Remarks Date Date Type 16-10-14 29-10-14 Interim 500.00 Rs.5.0000 per share(500%)Second Interim Dividend 16-07-14 28-07-14 Interim 500.00 Rs.5.0000 per share(500%)Interim Dividend 17-07-14 28-07-14 Special 4,000.00 Rs.40.0000 per share(4000%)Special Dividend 16-04-14 06-06-14 Final 2,000.00 Rs.20.0000 per share(2000%)Final Dividend 16-01-14 27-01-14 Interim 400.00 Rs.4.0000 per share(400%)Third Interim Dividend 15-10-13 25-10-13 Interim 400.00 Rs.4.0000 per share(400%)Second Interim Dividend 18-07-13 29-07-13 Interim 400.00 Rs.4.0000 per share(400%)Interim Dividend 17-04-13 06-06-13 Final 1,300.00 Rs.13.0000 per share(1300%)Final Dividend 14-01-13 23-01-13 Interim 300.00 Rs.3.0000 per share(300%)Third Interim Dividend 19-10-12 31-10-12 Interim 300.00 Rs.3.00 per share (300%) Second Interim Dividend 12-07-12 23-07-12 Interim 300.00 Rs.3.00 per share(300%)Interim Dividend 23-04-12 07-06-12 Final 1,600.00 Rs. 8/- per share (800%) Final Dividend & Rs. 8/per share (800%) Special Dividend 17-01-12 25-01-12 Interim 300.00 Third Interim Dividend 17-10-11 25-10-11 Interim 300.00 Second Interim Dividend

14-07-11 21-04-11 17-01-11 21-10-10 15-07-10 19-04-10

28-07-11 08-06-11 27-01-11 01-11-10 29-07-10 15-06-10

Interim Final Interim Interim Interim Final

15-01-10

27-01-10 Interim

300.00 800.00 200.00 200.00 200.00 1,400.00

Rs.8.00 per share(800%)Final Dividend Third Interim Dividend Second Interim Dividend Rs.10.00 per share(1000%) Special Dividend & Rs.4.00 per share(400%)Final Dividend Third Interim Dividend

200.00

Tata Consultancy Services Limited had declared good amount of interim as well as final dividend amount.TCS had a good dividend record over the years and consistency in declared dividends for the last 5 years. It can be stated from the tables that TCS is one of the best dividend paying organization.

Reliance Industries (Share price – 935 (record date-09 Dec 2014))Reliance Industries Limited is an Indian conglomerate holding organization headquartered in Mumbai, Maharashtra, India.

Table-7: Dividend Declared Announcement Date Effective Date

Dividend Type

21-04-14 16-04-13 20-04-12 21-04-11 26-04-10 07-10-09 21-04-08

Final Final Final Final Final Final Final

16-05-14 10-05-13 31-05-12 05-05-11 10-05-10 16-10-09 08-05-08

Dividend (%) 95.00 90.00 85.00 80.00 70.00 130.00 130.00

For the year ending March 2014, Reliance Industries has declared an equity dividend of 95.00% amounting to Rs 9.5 per share. Over the last five years Organization had paid good amount of final dividend on equity shares. It can be stated from the tables that reliance industries had good and consistent dividends payment record for the last 5 years.

ICICI Bank (Share price – 351 (record date-09 Dec 2014)) – ICICI Bank is an Indian multinational banking and financial services organization headquartered in Mumbai, Maharashtra. As of 2014 it is the second largest bank in India in terms of assets and market capitalization.

Table-8: Dividend Declared AnnouncementEffective DividendDividend (%) Remarks

Date 25-04-14 26-04-13 27-04-12 28-04-11 26-04-10

Date 05-06-14 30-05-13 31-05-12 02-06-11 10-06-10

Type Final Final Final Final Final

230.00 200.00 165.00 140.00 120.00

Rs.23.0000 per share(230%)Dividend Rs.20.0000 per share(200%)Dividend -

For the year ending March 2014, ICICI Bank had declared an equity dividend of 230.00% which amount to Rs 23 per share. The organization had consistency and regularity in final dividend payment and It can be also stated that increasing trend of dividend can be observed in table.

ITC Ltd. (Share price – 390 (record date-09 Dec 2014)) – ITC Limited or ITC is an Indian conglomerate headquartered in Kolkata, West Bengal. Its diversified business includes five segments: Fast Moving Consumer Goods, Hotels, Paperboards & Packaging, Agri Business & Information Technology.

Table-9: Dividend Declared Announcement Effective Dividend Dividend Remarks Date Date Date (%) 23/05/2014 03/06/2014Final 600% Rs.6.0000 per share(600%)Dividend 17/05/2013 31/05/2013Final 525% Rs.5.2500 per share(525%)Dividend 25/05/2012 11/06/2012Final 450% Recommended a Special Dividend of Rs. 1.65 per 20/05/2011 10/06/2011Final 445% Ordinary Share of Re. 1/- each and a Dividend of Rs. 2.80 per Ordinary Share of Re.1/- each.

Special Centenary dividend of Re. 5.50 per Ordinary Share of Re 1/- each and a dividend of 21/05/2010 09/06/2010Final 1000% Re. 4.50 per Ordinary Share for the financial year ended March 31, 2010.

ITC had paid good amount of dividend as Rs. 6 per share in May 2014.They have consistency in paying good amount of final dividend. It can be said that ITC is one of the best dividend payer.

Hindustan Unilever Ltd. (Share price – 802 (record date-09 Dec 2014)) – Hindustan Unilever Limited is an Indian consumer goods organization based in Mumbai, Maharashtra. It is owned by Anglo-Dutch organization Unilever which owns a 67% controlling share in HUL. Table-10: Dividend Declared

Announcement Date 16/10/2014 28/04/2014 15/10/2013 29/04/2013

Effective Date 31/10/2014 11/06/2014 31/10/2013 10/07/2013

Dividend Date Interim Final Interim Final

18/10/2012

01/11/2012 Interim

Dividend(%) Remarks 600% 750% 550% 600% 1250%

Rs.6.0000 per share(600%)Interim Dividend Rs.7.5000 per share(750%)Final Dividend Rs.5.5000 per share(550%)Interim Dividend Rs.6.0000 per share(600%)Final Dividend Rs.4.5000 per share(450%)Interim Dividend & Rs.8.0000 per share(800%)Special Dividend

01/05/2012 04/07/2012 Final 400% 17/10/2011 04/11/2011 Interim 350% 09/05/2011 08/07/2011 Final 350% 14/10/2010 01/11/2010 Interim 300% 25/05/2010 08/07/2010 Final 350% It can be stated from the above mentioned table that Hindustan Unilever Limited had paid a good amount of dividend over the last five year. Organization has consistency and regularity in dividend payment.

MAJOR FINDING Organizations dividend payment is getting enhanced day by day due to Changing retail Investors expectations, stiff competition and volatility & fluctuations.

From the data quoted it can be observed that dividend scenario is getting change as there is increase in dividend contribution in total return from equity.

1. In data analysis out of five companies four companies share prices has not increased after declaration of dividend.

2. Except NTPC all PSU’S like Coal India Ltd, ONGC, bank of India and State bank of India had gone for good dividend payment during the last five years.

3. Reliance Industries, ICICI, ITC had declared good amount of final dividend while TCS and HUL had declared good amount of Final as well as interim dividend.

4. NIFTY and Non Nifty PSU’s both organizations had paid good amount of dividend but NIFTY PSU”S dividend payment is more as compared to non nifty organizations.

5. NIFTY and Non Nifty Private organizations had paid good amount of dividend but NIFTY listed private organizations dividend payment is more as compared to non nifty organizations.

6. It can be seen that not only Public sector undertakings but private companies also had gone for good amount of dividend payout.

7. It can be stated over the year’s dividend payment trends are improving and now organizations declare and pay good amount of dividend post globalization.

SCOPE OF THE STUDY This research work is confined only to study and analyze dividend declaration of the last five years which assist to know organizations perspective of dividend payment.

CONCLUSION It can be observed from the data quoted above that there is good amount of contribution from dividend in overall return from equity. Increasing dividend contribution reflects the changing scenario of dividend and return from equity. It can also be stated that Organization / Companies’ perspectives are altering due to change and fluctuations in economic and business conditions as well as diverging investor’s expectation as exposed to high risk. Dividend proportion is getting weigtage and significance due to unpredictability in returns from shares as capital appreciation.

REFERENCES •

“Dividend and Bonus Policies of Indian Companies: An Analysis” by Pitabas Mohanty published in Vol. 24, No. 4, October-December 1999 (http://www.vikalpa.com/pdf/articles/1999/1999_oct_dec_035_042.pdf)

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Dividend signaling hypothesis – a case study of BSE Sensex Companies by Mrs. Savita published in Tactful Management Research Journal Vol. 2 , Issue. 4 , Jan 2014 ISSN : 2319-7943 Impact Factor : 0.119 (GIF)

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“Why Do Firms in India Pay Dividend in Presence of Firm Level Dividend Distribution Tax ? - An Agency Theory Based Explanation.” By Debabrata Datta,, Santanu K. Ganguli & Manu Chaturvedi published in Electronic form at: http://ssrn.com/abstract=2206821

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“Do Dividend Clienteles Exist? Evidence on Dividend Preferences of Retail Investors”

by John R. Graham and Alok kumar published in The journal of finance • vol. LXI, No. 3,June 2006.

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“Impact of dividend policy on investors’ value: A study of Indian firms” by Sujata Kapoor, synopsis of the Thesis to be submitted in fulfilment of the requirements for the Degree of doctor of philosophy in management. http://articles.economictimes.indiatimes.com/keyword/special-dividend http://www.itcportal.com http://www.nseindia.com http://www.ntpc.co.in/ www.hul.co.in www.icicibank.com www.ril.com www.tcs.com https://www.coalindia.in www.ongcindia.com https://www.sbi.co.in

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www.bankofindia.co.in