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Corporate largesse hits record ₹5 trillion amid profit slowdown
In a bold display of corporate confidence, Indian companies have handsomely rewarded shareholders with a record ₹4.9 trillion in dividends in FY25, even as profit growth slowed. The generous payout underscores a strategic shift among firms to prioritize returns for investors over aggressive reinvestment, signalling both optimism and caution in a volatile economic climate.
A Mint analysis of 496 BSE 500 companies, based on Capitaline data that uses both audited and unaudited numbers (including proposed dividends), shows that dividend payouts rose 11% year-on-year in FY25, outpacing net profit growth of 9.5%. This marks the first such divergence in three years. In contrast, profit jumped 29% in FY24 while dividends grew a modest 7.5%. In FY23 too, firms were less generous, when profit grew 11% but dividend payouts rose only 8.8%. The trend reversal in FY25 points to a strategic recalibration—corporates are choosing to reward shareholders more aggressively even as earnings momentum slows.
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"Rising dividends outpacing profits reveal corporate confidence in rewarding shareholders despite modest earnings growth," said Akshat Garg, assistant vice-president, Choice Wealth. 'While this signals stability to investors, it may also reflect caution—companies could be limiting reinvestment amid uncertain growth prospects."
Meanwhile, beyond just dividends from profits, Hemant Nahata, executive vice president, strategy at Yes Securities, offers a comprehensive view on shareholder payback, factoring in operating cash flows.
'Shareholder returns should be viewed holistically, combining dividends and buybacks," he noted. 'When we evaluate shareholder payback, we focus on how companies deploy their operating cash flows—not just profits. In FY25, Indian corporates returned around 29% of their operating cash flows to shareholders through dividends and buybacks, a marginal rise from 28.8% in FY24 and slightly below 31–32% in FY23, reflecting a consistent payout trend," he highlighted further.
While these generous giveaways reached record highs in the previous year, outpacing even the bottomline growth of the companies, it translated into a payout ratio of 35.2% (as a share of profit) in FY25. This ratio remains significantly below the decade's average of 42%, implying companies are distributing more but are also retaining a larger share of earnings compared to historical trends. 'This shows a shift in strategy. Companies are retaining slightly more profits, possibly due to fewer growth opportunities or macro uncertainty," said Pranay Aggarwal, chief executive officer of Stoxkart.
Manufacturing firms, in particular, appear cautious. 'Many companies are taking a wait-and-watch approach on capital allocation amid geopolitical uncertainty. Past missteps like the 2022 downturn in chemical firms due to poorly timed capex highlight the risks of aggressive investment, especially in capital-intensive sectors," noted Sreeram Ramdas, vice president, Green Portfolio PMS.
Further, since FY22, payout ratios have seen a decline, reflecting cautious optimism in capital allocation. 'The declining payout ratio shows that companies are adjusting dividend policies to align with more conservative cash flow assumptions," Aggarwal added.
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Despite this, around 62% of companies in the sample have been unwaveringly sharing the bounties over the past five years. Among these, around 18% have been bestowing their shareholders with higher dividends each year since 2020-21. In FY25, around 55% of firms doled out higher dividends compared to the previous year while only 17% firms saw a decline. 'The recent rise in dividends is driven more by past profitability and reserves than by sustained earnings growth. If macro headwinds continue, payouts may moderate," said Asutosh Mishra, head, institutional equities, Ashika Stock Broking.
Moreover, the top ten dividend payers accounted for roughly 40% of India Inc's total dividend payouts in FY25, distributing a staggering ₹1.9 trillion to investors.
'This reflects confidence from large-cap firms with stable cash flows," said Mishra. 'Some may be using dividends tactically in a high-liquidity environment. A company-specific lens is essential to avoid overinterpretation."
Leading the pack was TCS with payouts of over ₹45,000 crore, exemplifying the IT sector's cash-rich dominance. Close behind were HDFC Bank and ITC with payouts nearing ₹17,000-18,000 crore, while Coal India, ONGC, and Vedanta each contributed between ₹15,000-16,000 crore, reflecting the breadth of dividend leadership across sectors.
For investors looking at dividend plays, Garg from Choice Wealth stresses the importance of diversification and fundamental strength. 'While reliable dividend payers offer steady income, concentrated exposure increases risk. 'A balanced portfolio with fundamentally strong and consistent dividend-growers is key."
This is the first part of a four-part series of data stories on the dividends declared by India Inc.
