Trends in Dividend Payout

Dividend decision has been a subject of enquiry of financial analysts, academicians and researchers for about five decades now. The present study examines the trends in dividend payout of select Indian companies over the period 1992-2004. An attempt has been made to take a holistic view of the issues relating to dividend policy by adopting a systematic approach to an analysis of trends in dividend payout. The study is based on 590 companies listed on the Bombay Stock Exchange, and the data is collected from the CMIE Prowess database. Dividend Payout Ratio (adjusted for bonus and right) is the main variable used in the study for the purpose of analyzing the trends in dividend payment pattern. These trends indicate that the sample companies, which declared dividend in any given year, declined over the period of study from 448 companies in 1992 to 376 companies in 2004. However, the average dividend payout ratio increased significantly along with showing a volatile trend ranging from about 25 - 68% during 1992-2004. In addition, wide industry-wise fluctuations were visible and a major proportion of the sample companies (over 50% through out the period of study) followed a dividend policy of part retention and part distribution of profits.