DIVIDEND BEHAVIOUR OF NIFTY MULTINATIONAL COMPANIES (MNC) IN INDIA

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1 DIVIDEND BEHAVIOUR OF NIFTY MULTINATIONAL COMPANIES (MNC) IN INDIA K.Mahalakshmi Ph.D. Research Scholar, PG & Research Department of Commerce, Nallamuthu Gounder Mahalingam College, Pollachi, Tamilnadu, India. Dr.S.Benjamin Christopher Associate Professor & Head (Retd.), PG & Research Department of Commerce, Nallamuthu Gounder Mahalingam College, Pollachi, Tamilnadu, India. Abstract The present paper attempts to find out the dividend pattern of Nifty MNCs and also analyses the dividend payout trend. The study is based on the nifty multinational companies which are listed in NSE for the period of ten years ( ). Indian multinational Companies started to face the stiffest competition as entry of foreign companies and foreign multinational companies are struggling with domestic companies in order to attract investors as well. Therefore the companies are supposed to adopt the crucial dividend decision as to satisfy the existing share holders and also attract the new investors. The analysis result reveals that Brittannia industries ltd has paid more dividend and ABB ltd has paid less dividend with more consistent among the nifty MNCs. Vedanta ltd is inconsistent and more volatile nature in paying dividend. Keywords: Nifty, MNC and Dividend. INTRODUCTION Dividend policy plays a significant role in company decision. It is one of the most crucial decisions that a company takes to retain and attract investors. Dividend is not only indicator of financial performance of a company, but also creates the confidence of investors in a company's future prospects. The surplus of a company can either be distributed as dividend payout or be retain back into the business as retained earnings. The major purpose of paying dividend is to Page No: 261

2 attract more new investors and satisfy the existing investors. Therefore the company can maintain a good reputation in the market. Dividend is most significance for investors because it provides assurance about the firm s financial well-being. The dividend policy is most vital and still debatable topic in corporate world. Many researcher have stated that Dividend still remains being a puzzle, since they have been trying to find the missing pieces in the dividend policy for more than half a century (Baker, 2009 p.30). After Globalization, Foreign companies started moving towards Indian market and Indian companies also started to expand their business outside the country. Indian Companies started to face the stiffest competition as entry of foreign companies and foreign companies are competing with domestic companies in order to attract investors as well. On one side, multinational companies have to be defensive in paying dividend as to retain the earnings in order to face any downtrend in the market conditions, at the same time the companies have to follow aggressive dividend policy to attract more new investors, since investors have a wide range of choice in making investment in global era. OBJECTIVE OF THE STUDY The prime Objective of the study is To examine the trend in dividend payment of NIFTY multinational corporations in India. METHODOLOGY The study is based on multinational companies in India selected from companies listed National Stock Exchange particularly NIFTY MNCs which satisfy the criteria that the company should have given dividends in all the year of study period. Present study is both descriptive and analytical nature. Secondary data are collected from Capitaline Corporate Database of Capital Market Publishers (I) Ltd. Mumbai and official website of selected MNCs. Dividend Behaviour of nifty MNCs. Dividend policy is one of the important and crucial decision area of financial management. The important function of finance manager is to make tradeoff between magnitude of retained earnings and distribution of dividend. The main objective of the present paper is to evaluate the dividend payout trend of nifty Multinational companies in India. Dividend per share (DPS), Page No: 262

3 Dividend payout ratio (DPR), Dividend yield (DY) are commonly used as indicators of nature of dividend policy adopted by a company. While analyzing the dividend policy adopted by the nifty MNC companies, DPS has been used as the indicator of dividend. In present study, DPS has been selected as the indicator of dividend policy. Moreover, most of the previous studies have used Dividend Per Share (DPS) as a vital measure of dividend payout policy. TABLE 1-Analysis of Dividend Per Share (DPS) of Nifty MNCs. COMPANY NAME ABB India ltd Ambuja cement ltd Britannia industries ltd CastrolIndia ltd Colgate palmolive (India) ltd cummins India ltd Maruti Suzuki India ltd Siemens ltd Vedanta ltd Average The table 1 shows the dividend per share of MNC for the study period. It is disclosed that Vedanta ltd has paid the highest amount of Dividend per share Rs.45 in the year 2008 whereas the same company has paid lowest DPS of Rs in the year 2013 among the sample companies. During the study period Nifty MNCs have paid averagely Rs and it is interpreted that nifty MNCs have paid more dividend in the year 2016 and have paid less dividend in the year 2013 as it shows that average dividend Rs In over all analysis, Nifty MNC dividend trend showing the decrease trend from the year 2009 till the year 2013 again it increased from the year Table:2: Company wise Dividend Analysis of the year DPS (in Rs) Company name MEAN SD CV ABB India ltd Ambuja cement ltd Page No: 263

4 Britannia industries ltd CastrolIndia ltd Colgate palmolive (India) ltd cummins India ltd Maruti Suzuki India ltd Siemens ltd Vedanta ltd AVERAGE The table 2 indicates the dividend policy of Nifty MNCs. The highest average mean dividend per share(dps) Rs falls under the firm Britannia Industries ltd which inferred that it has paid more dividend per share among the Nifty MNCs and revealed that it declared high dividend in all the year almost. The lowest average mean of DPS is RS.2.88 of ABB India ltd and indicated that it has paid less amount of dividend among Nifty MNCS. Britannia industries ltd, CastrolIndia ltd, Colgate palmolive (India) ltd, cummins India ltd, Maruti Suzuki India ltd, Vedanta ltd are having high mean of DPS as compared to the Average DPS and it is inferred that the companies are adopting a liberal dividend policy. Where as,abb India ltd, Ambuja cement ltd and Siemens ltd are having lowest average DPS than average DPS which implies that the companies are following more conservative policy in paying dividend. Consistency of dividend in NIFTY multinational companies in respect of paying dividend during the study period has also been assessed in this paper. In order to find out the consistency in dividend, the co efficient of variation (CV) of DPS for each NIFTY MNC company has been computed. A company which has lower CV of DPS which implies that the company maintains higher consistency in respect of paying dividend. The company which has highest CV of DPS among the sample companies, it depicts that the company is more inconsistent and high volatile nature in paying dividend. The co efficient of variation lies between percent and percent.the lowest value of co efficient variation is percent falls under ABB India ltd which indicates that there is more consistency in Dividend per share (DPS) and followed stable dividend policies. The highest value of co efficient of variations is in Vedanta ltd and indicated that there is high volatile in DPS. It is also interpreted that Maruti Suzuki ltd., Siemens and Vedanta are more volatile and having less consistency among nifty MNCs. Page No: 264

5 The table 3 exhibits the year wise analysis of trend in average DPS of selected Nifty multinational companies. It is inferred that among the selected Nifty MNC companies, average DPS has exhibited a fluctuating trend over the study period. The average DPS has increased from Rs in 2002 to Rs in 2016.Nifty MNC has paid highest dividend Rs during the study period as it is found the highest average DPS of selected MNCs in the year However there were in more fluctuations in DPS. Table 3 Year wise analysis YEARWISE TREND ANALYSIS-DPS(in Rs) Year AVERAGE SD CV Average During the study period, Nifty MNCs have paid more dividend almost, as the average DPS is found more than the grand average of DPS Rs and it is indicated that the companies adopted liberal policy in the year 2007,2008,2009, 2015 and 2016 of study period. Despite it is found more fluctuation in paying dividend, after 2015, Nifty MNCs have started paid more dividend and found increasing trend in paying dividend. Page No: 265

6 It is found that the co-efficient of variation lies between percent and percent. The lowest value of co efficient of variation is percent found in the year 2015, which indicates that, there is more consistent in DPS and Nifty multinational companies have paid reasonable dividend during the study period. The highest value of co efficient of variation is percent in the year 2008 and indicated that there is high volatile in dividend paid and also signifies that the companies are inconsistent with more fluctuations in paying dividend during the study period. The grand average CV of study period is percent. During the study period, nifty MNCs have higher CV of DPS than the grand average of CV of DPS in 2007, 2008,2009 and 2013 which indicates that companies are more inconsistent and high volatile nature in dividend paid. Whereas, mostly companies were consistent in paying dividend as it has lower CV than the grand average of CV, it is inferred that the companies have steadily paid dividend to the shareholders and have paid reasonable dividend by all the companies almost in the years of 2010, 2011, 2012, 2014, 2015 and Conclusion Britannia industries ltd, Castrol India ltd, Colgate palmolive (India) ltd, cummins India ltd, Maruti Suzuki India ltd, Vedanta ltd have adopted a liberal dividend policy where as ABB India ltd, Ambuja cement ltd and Siemens ltd have followed more conservative policy in paying dividend among nifty MNCs. It is also found that ABB ltd has followed a stable dividend policy and Vedanta ltd is more volatile in dividend payout policy. During the study period in the year 2016, nifty multinational companies have paid more dividends. Moreover, in the year 2010,2011, 2012,2014,2015 and 2016 nifty MNCs have followed stable policy. Reference Monica Singhania (2007) Dividend policy o f Indian companies, Vol.13, pp (6-29) Manickam and Nateson (2008) Dividend Behaviour in Indian industries vol No 4,pp(30-39) Franklin John and Muthusamy (2010), Leverage, Growth and Profitability as Determinants of Dividend payout Ratio-Evidence from Indian paper Industry Page No: 266

7 Krishna moorthy and Ramesh (2011) An empirical analysis of corporate Dividend performance in selected pharmaceutical companies in India, vol 1,pp(1-9) Solanki Ashvin H (2012), An empirical study of corporate Dividend policy-a study with reference to selected Auto sector,vol 5 PP(38-46) Page No: 267