Data on top 20 dividend paying companies show that for the financial year ended March 2008, nearly Rs 18,000 crore have been handed over to their shareholders. Of these, the top five PSU and private corporate houses have distributed about Rs 9,000 crore and Rs 6,000 crore respectively. Since under the current tax rules, dividends are tax-free in the hands of the receiver, market players say this is a real wealth in the hands of investors.
Despite rising interest rates and input costs, most of the leading corporates have declared strong quarterly and annual numbers. The buoyancy in their performance and confident business outlook have allowed a large number of companies to be generous with dividend distribution, running into thousands of crores, market players said.
Among the PSUs, it is the navaratna companies which have given handsome dividends, which in a major way filled up the government’s coffers, other than paying its non-government shareholders. And among the private companies and corporate houses, other than the traditional frontline entities like Reliance (Mukesh Ambani and ADAG) groups, Tatas, Birlas and ITC, the Indiabulls group stands out for its huge payout to its shareholders. The group’s total payout of Rs 731 crore for financial year 2007-08 is about 60% of its full year net profit.
In a bad market, handsome dividend payouts by companies also attract those investors who look for high dividend yield stocks. Dividend yield is calculated as the total yearly dividend payout divided by the current market price. Some investors believe high dividend yield stocks would continue to pay higher dividend during the current year as well and hence the extra interest in the stock.