I was playing with some data today and wanted to see if there is any relation between dividend paid and price appreciation, and if it makes sense to stay put in good dividend paying companies.
Sharing the data here if anyone wants to use it for their analysis.
- Only those companies which were active on 31st March, 2020 are there in data
- Dividend is adjusted for changes in face value if there were any stock splits
Dividends paid by companies since April 2020.pdf (933.1 KB)
Dividends paid by companies since April 2020.xlsx (35.3 KB)
Talking about 1st company in the list, 974/- dividend is quite substantial for that company. Is there anything shady about the company, just a doubt. Promoter holding changed drastically post dividend distribution, did the promoters paid themselves in form of dividend and then utilized the same funds to increase their stake in the company? Also from their dividend history, this(974/-) appears as a one-off case. What shall we deduce from this observation?
Source: Yahoo Finance
For comparison, though Tide Water Oil Company too gave a substantial dividend but neither its dividend history nor its share holding pattern suggest anything suspicious.
Source: Yahoo Finance
Request experts to throw in some light on this. Excuse if the question is senseless, noob here.
At that time, it was not Aurum Proptech… it was Majesco (an IT subsidiary of Mastek) which was sold off on a slump sale and they gave away the proceeds as dividend. But they had some residual real estate in the company. This residual company was then sold to Aurum at around 80 rupees. Thats the story
Dividend are not attractive.
They are taxed like normal income. There should be an option which should be given to the shareholders to allow withholding of dividend, so that such amounts can be reinvested without any taxation. It would be good for the business as well as the shareholders who want to stay long term with the company.
It is strange that the market does get excited even now after the dividends are taxed as normal income.
So what is more attractive business to invest is something else. It is definitely not dividends.
Tide Water main product is lubricant. With EV (or other technology) replacing Engine in automobile, the general expectation of market is decline in demand and limited terminal value. Hence, the stock is considered more as long tenure bond then equity in my view. Even Castrol, which was once blue chip in 1990s and 2000s, is now trading at attractive dividend yield. My understanding may be wrong.
Appreciate your effort and approach to identify high dividend paying companies. However, my limited submission would be to do this analysis at least over 5 years to remove out cyclical movement. The March 2020 was among worst period due to COVID 1st phase and hence dividend paid as compared with price may appear more attractive. Increasing period of 5 years and above would also provide more insight in consistency of cashflow.
One more suggestion is also to look at Share buyback in addition to dividend as same being also received by sharheolder from the company and more tax efficient way to return the cashflow. Large IT companies like TCS/Wipro and Infosys along with many PSUs has returned major amount as share buyback to shareholders. While it is very difficult, I generally try to divide Amount of buyback with number of share at end of year (not a correct way but good approximation for my working) in the company which I am interested. That provide better view of return of cashflow to shareholder than only dividend.
Once again, appreciate you efforts my comment was only to improve utility of working (for me in particular and forum in general )
Once upon a time, I used to wait for the 3 brokerages that would put out the Top Dividend Paying companies with another FA filter (so crap companies would not show up in that list). I would pick the ones that would pay more than 2.5-3%+ names, and then select the stocks based on TA Support levels. I accumulated many companies including companies like Nalco, TataMotors, Infosys and others. I also picked up CoalIndia, REC etc that have not done so well overall. But, considering that I have done this with a view of TotalReturn, it has been a great run.
Now that Dividends are taxed as ordinary income about a threshold, it is NOT looked upon favorably esp for retirees that live on Interest and Dividends in India. AND, hence the vogue to follow this ‘strategy’ is not as popular.
Measuring success with a 1 year bull market, will not good data points, since you have to do in bull and bear, and also in a time when you do not have Covid when many companies turned off dividends or postponed it or delayed it or could not afford to give it.
As in the case of US Dividend payers, these companies do NOT cut dividends, since it is a sacred cow. If you cut dividends, the stock price tanks immediately. Exception to this rule for the first time ever was in these Covid times when Boeing, Carnival, GM etc cut and there was no effect since it was a collective decision to conserve cash.