Hefty payouts: 2021, a year of healthy dividend returns
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Apart from stellar rise in stock valuations as well as bumper IPOs, the year 2021, will be remembered for healthy payouts of dividends by some listed entities.
Accordingly, accelerated economic recovery, along with healthy demand and better margins enabled Aurum Proptech, Clariant Chemicals, Bharat Petroleum, Goodyear Tyre and Rubber Co, PNB Gilts, amongst others to give hefty dividends.
"These companies have a common thing that they have consistently made good profits and are consistently getting good results and hence they have rewarded their shareholders with good dividends," said Vijay Dhanotiya, Lead of Technical Research, CapitalVia Global Research.
"Another reason is the excess of cash in the companies. These companies are expected to perform well in the future as well."
Notably, companies such as Page Industries, Indian Oil Corporation, Coal India, Satluj Jal Vidyut Nigam, Power Finance Corporation, and Hindustan Petroleum, among others, have been providing healthy dividends to their investors.
"Investors see the dividend payment as a sign of a company's strength, a sign of stable company, and a sign that management has positive expectations for future earnings," said Nandish Shah, Senior Derivative & Technical Analyst, HDFC Securities.
"On the flip side, the major disadvantage of paying dividends is the cash paid out to investors cannot be used to grow the business."
According to Santosh Meena, Head of Research at Swastika Investmart: "It is always considered to be good (sign) if a company is paying dividends regularly (it) means it is rewarding its shareholders by sharing the profit, but it is not a thumb rule because companies that are at the growth stage generally prefer to reinvest profits into the business expansion rather than distributing it to shareholders."
"(However), generally, good companies that are at the mature stage share their profits regularly through dividends. Investors should look for dividend yield instead of dividend amount while choosing any stock for the high dividend."
The dividend yield is a ratio that helps investors understand how much dividend a company pays out each year relative to its stock price.
