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PSUs pay higher dividends than their pvt sector peers

This article was posted on Aug 2, 2009 and is filed under Press Releases

NEW DELHI: Call it a stimulus package for equity investors. Government companies in India have outperformed their private sector peers in doling
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out dividends during the recent phase of economic turmoil.

The average dividend yield of PSUs stood at 2.01% in FY09, whereas private companies showed an average dividend yield of merely 1.73%, according to a SundayET analysis. The government, which is the largest shareholder of the PSUs, in turn became the major beneficiary of the dividend dole-out. Dividend yield shows what percentage of the share price a company gives to its shareholder in the form of dividend.

Led by banks such as Bank of Maharashtra and Vijaya Bank which had a dividend yield of over 5% in FY09, other high dividend paying PSUs included Shipping Corporation of India and GAIL (India) both of which yielded a dividend of over 3%. Two other PSU banks – Indian Bank and Allahabad Bank – also had dividend yield of over 4%.

According to data compiled by SMC Capitals, PSUs paid a dividend of Rs 23,238 cr in FY09 in comparison to Rs 21,803 cr during the previous year, witnessing a growth of over 6%. Significantly, the government got a major share of the benefits as their share has also gone up by over 5.5% or Rs 930 cr to Rs 17,316 cr during FY09. Higher dividend is mainly due to increase in dividend payout ratio, which has gone up from 23.76% during FY08 to around 25% in FY09.

According to Jaydeep Malkan, co-founder of Market Trend Analysis, the first focus of the PSUs is their shareholders hence they pay higher dividends, whereas private companies are more concerned about the future growth. Also, PSUs gave higher return during the last year in terms of market appreciation.

The analysis, however, includes only BSE 500 companies and is based on the data provided by Eastwind Capital Advisors, a firm involved in the benchmarking and quantitative research advisory solutions to institutional investors. Out of these 500 companies, 43 companies were PSUs, whereas, the rest 457 were private companies. But out of 43 PSUs, 39 of them paid dividend during FY08 and FY09. In case of private companies, out of 457 private sector companies only 328 companies paid dividend during FY08, although the number of dividend paying private companies increased marginally to 344 during FY09.

Highest dividend paying private companies are Madras Cements, Sesa Goa, Monsanto India and SRF. Their dividend yield is over 10%. While some of the private companies have higher dividend yield, a majority of them are either non-dividend payers or dividend yield is much lesser.

However, overall dividend yield was relatively higher during the FY08 than that of FY09. During the FY08, the dividend yield of PSUs was 2.61%, while it was only 1.96% in case of private companies.

source: Economictimes

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