Discussion and comparison of shares of different companies
Answers
Ask the average Indian about the best investment in the country and chances are he will say real estate or gold. Traditionally, Indians have never rushed to jam the "buy" button in stock markets - and with good reason. Indian markets are highly volatile, and although the country's main index, the Bombay Stock Exchange (BSE), has more than trebled in the past decade, dividend payouts by companies are nowhere near as impressive.
A Business Today study of more than 6,000 stocks came up with a startling finding: only six of these companies have paid dividends of more than 30 per cent of their net profit in the past decade, as well as outperformed the benchmark index for eight of those 10 years. The six that made the list - Colgate-Palmolive, Hawkins Cookers, Emami, Eicher, HDFC and GRUH Finance - are all high-growth companies. And they have been liberal with dividend payouts.
Research shows one-fifth of the BSE 500 Index companies share more than 30 per cent of their profits with investors. But that still masks another truth: Indian companies are, in general, far from generous in paying dividends to shareholders. Not surprisingly, dividend-rich companies are a huge draw with investors. Our study showed companies that have paid over 30 per cent dividends accounted for 41 per cent of the market capitalisation in the last financial year compared with 27 per cent in 2008/09.
Perhaps the Indian government could take a cue from Brazil and Chile, which have made it mandatory to pay dividends to shareholders. Compulsory dividends could draw risk-averse domestic investors back into the equity market - and thereby also help cash-strapped companies in the country raise money for business.