Brokers see companies lining up 'milestone' dividends in 2011
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DIPIN
Oct 17, 2010, 1:08:14 PM10/17/10
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Brokers see companies lining up 'milestone' dividends in 2011
As many as 18 domestic companies may offer special dividends in 2011, as they enter their 25th, 50th, 75th and 100th years of existence in business.
Brokers said companies commemorating such ‘milestone years’ tend to pay shareholders a higher-than-normal portion of their profits in such years.
“Companies celebrating milestone years, like silver, golden, platinum jubilees, and centenary, have shown a trend of distributing higher dividends to their shareholders,” said retail broking firm ICICIdirect.com , in a report, which has compiled a list of firms that may announce dividends next year.
Thirteen companies will celebrate 25 years of existence, three will celebrate 50 years, one will celebrate 75 years and one, 100 years, said ICICIdirect. Brokers said companies, which have a record of paying rich dividends consistently, tend to dole out a higher amount on such occasions. In some cases, investors pressure profitable companies to declare liberal dividends.
Earlier this year, two-wheeler major Hero Honda announced a 5,500% dividend on completing 25 years. Cigarettes-to-hotel major ITC paid 1,000% to celebrate 100 years of existence.
“If the situation next year remains as good as it is now, then we can expect some good dividends. A lot will depend on the cash flow of companies next year,” said KR Choksey, a veteran investor and founder of broking firm KR Choksey Shares and Stocks.
Earnings of the 30 companies that constitute the Sensex are expected to grow 18% in 2011-12 (April 2011-March 2012) and over 22% in 2010-11.
Companies cut down their dividend payouts since January 2008 after the financial crisis broke out, forcing them to preserve cash in tough times. Dividends and expansion plans took a back seat till the end of 2009, but, this year, companies have begun loosening their purse strings to pay dividends, with managements more confident about business prospects.
A fund manager with a bank-sponsored mutual fund said ‘milestone dividends’ is a concept unique to India. “At the end of the day, dividend is an outcome of profits and economic conditions. Such talk of milestone years would not have existed had the economic recession extended to 2011,” he said.
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Dipin Kwatra
9810063616
Brokers said companies commemorating such ‘milestone years’ tend to pay shareholders a higher-than-normal portion of their profits in such years.
“Companies celebrating milestone years, like silver, golden, platinum jubilees, and centenary, have shown a trend of distributing higher dividends to their shareholders,” said retail broking firm ICICIdirect.com , in a report, which has compiled a list of firms that may announce dividends next year.
Thirteen companies will celebrate 25 years of existence, three will celebrate 50 years, one will celebrate 75 years and one, 100 years, said ICICIdirect. Brokers said companies, which have a record of paying rich dividends consistently, tend to dole out a higher amount on such occasions. In some cases, investors pressure profitable companies to declare liberal dividends.
Earlier this year, two-wheeler major Hero Honda announced a 5,500% dividend on completing 25 years. Cigarettes-to-hotel major ITC paid 1,000% to celebrate 100 years of existence.
“If the situation next year remains as good as it is now, then we can expect some good dividends. A lot will depend on the cash flow of companies next year,” said KR Choksey, a veteran investor and founder of broking firm KR Choksey Shares and Stocks.
Earnings of the 30 companies that constitute the Sensex are expected to grow 18% in 2011-12 (April 2011-March 2012) and over 22% in 2010-11.
Companies cut down their dividend payouts since January 2008 after the financial crisis broke out, forcing them to preserve cash in tough times. Dividends and expansion plans took a back seat till the end of 2009, but, this year, companies have begun loosening their purse strings to pay dividends, with managements more confident about business prospects.
A fund manager with a bank-sponsored mutual fund said ‘milestone dividends’ is a concept unique to India. “At the end of the day, dividend is an outcome of profits and economic conditions. Such talk of milestone years would not have existed had the economic recession extended to 2011,” he said.
--
Dipin Kwatra
9810063616
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