Compliance Engineering Journal ISSN NO: 0898-3577

A STUDY ON BEHAVIOUR PATTERN OF DIVIDEND PAY-OUT: SELECTED BLUE-CHIP COMPANIES IN Author Co - Author Dr.K.R.Sivabagyam A.Ranjitha Assistant Professor K. Madhu Varshini Department of Commerce N.Deekshithaa Sri Krishna Arts and Science College S. Kabilambika E-mail Id: [email protected] II M.Com Students MOB: 7871809789 E-mail Id: [email protected] [email protected] [email protected] [email protected] Mob: 9486939255; 9715184177; 9025868186 ABSTRACT , Tata Consultancy services (TCS) and in India and The term blue-chip was used to describe observe the behaviour pattern of the three high- priced stocks in 1923 when Oliver measures of dividend policy of the blue- Gingold, an employee at Dow Jones chip companies in India. observed certain stocks trading at $200 or more per share. Poker players bet in blue, KEYWORDS: Blue Chip Companies, white and red chips with blue chips having Dividend Policy, Investment Proposals. more value than both red and white chips. INTRODUCTION Today, blue chips stocks don’t necessarily refer to stocks with a high price tag, but In the exchange of India there are literally more accurately to stocks of high-quality thousands of companies but when it comes companies that have with stood the test of to financial stability only few companies time. A blue-chip company is a are financially stable and in other financial multinational firm that has been in aspects. Long term investors seek out for operation for a number of years. Blue chip stable companies for their investments. So companies are business that investors see their investments don’t become sour as reliable and profitable. Not only do companies which can withstand such huge these companies operate profitably in good investors is known as blue chip companies. times but also in bad times. Additionally, The name blue chip was derived from the they more likely to survey market game poker in which the blue chips have fluctuations. In other words, they are large the highest value. In the year 1923 blue and extremely credit worthy businesses. A chip were first used to describe high priced blue-chip company is famous for the stocks. Blue chips stocks dose not refer to quality and wide acceptance of its stock with a high price tag but also more products. Additionally, people know it accurately refers to stocks of high quality always makes money and pays dividends. companies that withstood the test of time. Objective of the study is to calculate the These stocks are highly liquid since they three measures of dividend policy of the are frequently traded in the market by five selected blue-chip companies’ individual and institutional investors alike. imperial tobacco company of India limited These stocks cost high as they have a good (ITC), Hindustan limited, reputation and are often market leaders.

Volume 12, Issue 4, 2021 Page No: 98 Compliance Engineering Journal ISSN NO: 0898-3577

An investor who needs cash on a whim can as the 'Imperial Tobacco Company confidently create a sell order for their of India Limited', the company was stock knowing that there will be always a renamed as the 'India Tobacco buyer on the end of the transaction. Company Limited' in 1970 and Conservative investors with a low risk later to 'I.T.C. Limited' in 1974. profile or nearing retirement can invest in The dots in the name were removed blue chip stocks. These stocks are great for in September 2001 for the capital preservation and their consistent company to be renamed as 'ITC dividend payments they also protect the Limited' where 'ITC' would no portfolio against inflation. Blue chip longer be an initialize. The stocks are less volatile investments than company completed 100 years in owning shares in companies without blue 2010 and as of 2012–13, had an chip status because they have an annual turnover of US$8.31 billion institutional status in the company. They and a market capitalization of are financially strong with a track US$52 billion. It employs over recording of producing earnings with a 30,000 people at more than 60 moderate amount of debt they also have a locations across India and is part of strong name in its industry with dominant Forbes 2000 list. products or services. These are the companies that are large corporations that  Limited (HUL) have been in business for many years, and is a British-Dutch manufacturing are very stable. company headquartered in , India Its products Blue chip companies are the companies include foods, beverages, cleaning with little debt or no debt, large market agents, products, capitalization, stable debt equity ratio, high water purifiers and consumer return on equity (ROE) and return of asset goods. (ROA). The solid balance sheet fundamentals aligned with the high  Reliance Industries Limited is an liquidity have earned all blue-chip stocks Indian multinational the investments grade bond ratings. In his company headquartered in book, Benjamin graham says that the Mumbai, Maharashtra, India. consecutive investors should look for Reliance owns businesses across companies that has paid dividend for India engaged in energy, consistently for 20 years. An investor can petrochemicals, textiles, natural track the performance of blue chip stocks resources, retail, and through a blue chip index, which can also telecommunications. be used as an indication of industry on  Tata Consultancy Services is an economy performance and that’s what the Indian multinational technology SENSEX exactly does. company that specializes in  ITC Limited is an Indian information technology services multinational conglomerate and consulting, headquartered in company headquartered in , Mumbai, Maharashtra, India and . Established in 1910

Volume 12, Issue 4, 2021 Page No: 99 Compliance Engineering Journal ISSN NO: 0898-3577

has its largest workforce based in  (Faris Nasif AL-Shubiri, 2012) Chennai, Tamil Nadu, and India. examined 60 industrial firms listed on Amman stock exchange to  Wipro Limited is an Indian understand the dividend payment multinational corporation that behavior. The result shows that provides information technology, probability of dividend payment consulting and business process increases with the profitability and services. It is headquartered in , Karnataka, India. In firm size. He concluded that 2013, Wipro separated its non-IT determinant of dividend policy are businesses and formed the the same in Jordan economy as that privately owned Wipro Enterprises. of developed economy. LITERATURE REVIEW

 (Nuraddeen Usman Miko and Hasnah Kamardin, 2015) examined the effect of ownership structure on corporate dividend  (Joshi, 2011) examined the impact policy in Nigeria. The study of dividend policy on stock prices revealed that ownership structure in Nepal. The selected sample was has a significant impact on of 210 companies comprising dividend payout. The higher the banking and non-banking sector. institutional and block-holders Dependent variable was current shareholdings, higher will be the stock price and four other variables rate of dividend. were taken as independent namely  (Fawaz Khalid Al- Shawawreh, dividend per share, lagged price 2014) examined 53 listed earnings ratio, lagged market price companies of Jordan to establish per share and retained earnings per relationship between dividend share. The result shows that payout and share price volatility. dividend per share is a motivating With the help of multiple factor and has strong impact on regression analysis he concluded market price per share of the that there is a significant impact of banking and non-banking firms. It dividend yield on share price. is also analyzed that dividend per share has greater impact on stock  (Sobha rani and Patha Sarathi, prices than retained earnings per 2013) focused on the determinants share. In short, the study concluded of dividends and itsperformance of that both dividend and retained select pharmaceutical companies in earnings per share affect stock India. This study evaluates the prices of banking and non-banking performance of various sector. pharmaceutical companies and their annual compound growth rate.  (R.Sucharitha, 2010) in her study entitled “Dividend and Dividend

Volume 12, Issue 4, 2021 Page No: 100 Compliance Engineering Journal ISSN NO: 0898-3577

Policy: An Empirical Study in specific purpose in the study. Secondary India Pharmaceutical Industry” data has been obtained by the website. For states that a sound financial the purpose of this study the five blue chip performance in a pharmaceutical company. Research is a systematic and company can be determined by the continues method of defining a problem, measure of its dividend payout collecting the facts and analyzing them, features. This again refers to two reacting conclusion forming basic objectives of a firm i.e., generalizations. Research methodology is maximizing the wealth of the a way to systematically solve the problem. firm’s owners and providing Sample company selected for this study: sufficient funds to finance its growth. Therefore, it could be Company Year of Market concluded that ultimate dividend S.n Name Establishme Capitalizatio o nt n (Rs.Cr.) policy of any company depends on 1 Imperial 24 August 256,065 numerous factors. Tobacco 1910 Company OBJECTIVES OF THE STUDY Limited 2 Hindustan 1933 510,041 Unilever In the present study an attempt has been Limited made to study the behavior pattern of the 3 Reliance 8 May 1973 1,403,742 dividend policy adopted by blue chip Industries 4 TATA 1 April 1968 1,124,265 companies in India during the period of Consultanc study of financial year 2015 to 2016 y Services financial year 2019 to 2020. 5 WIPRO 29 December 228,544 1945 Source: Constructed from respective company website  To calculate three vital measures representing the dividend policy of Research design - A research design is the selected Five blue-chip companies arrangement of condition for collection in India such as dividend per share and analysis of data in a manner that aims (DPS), earnings per share (EPS), to combine relevance to the research and dividend payout ratio (DPR). purpose with economy in procedure. It is the conceptual structure within which  To study the behavioral pattern of research is conduced. Analytical research the dividend policies of the is used in this study. selected companies in India by LIMITATIONS OF THE STUDY measuring the different statistical measure mean, standard deviation,  The study is focused only on five co-efficient of variation. blue chip companies.  The limited tools have been used in RESEARCH METHODOLOGY the study. Sources of Data - The main sources of data for the present study used are TOOLS FOR ANALYSIS secondary in nature. Secondary data  Dividend per share (DPS) consists of information that already exists  Earnings per share (EPS) somewhere and has been collected for

Volume 12, Issue 4, 2021 Page No: 101 Compliance Engineering Journal ISSN NO: 0898-3577

 Dividend pay-out ratio (DPR)  Standard deviation  Mean  Co-efficient of variation.

ANALYSIS AND INTERPRETATION

DIVIDEND PER SHARE (DPS)

Dividend per Share (DPS) is the total amount of dividends attributed to each individual share outstanding of a company. Calculating the dividend per share allows an investor to determine how much income from the company he or she will receive on a per- share basis. Dividends are usually a cash payment paid to the investors in a company, although there are other types of payment that can be received. Dividend per Share Formula

The formula for calculating dividend per share has two variations

 Dividend per Share = Total Dividends Paid / Shares Outstanding

 Dividend per Share = Earnings per Share x Dividend Payout Ratio

TABLE NO: 1

DIVIDEND PER SHARE

RELIANCE Year ITC HINDUSTAN INDUSTRIES TCS WIPRO 2015-16 8.5 9.5 10.5 6.5 1.0 2016-17 4.75 10.00 11.00 7.0 2.0 2017-18 5.15 12.00 6.0 6.0 1.0 2018-19 5.75 13.00 6.5 5.0 1.0 2019 – 20 10.15 14.00 6.5 12.0 1.0 Total 34.3 58.5 40.5 36.5 6 Mean 6.86 11.7 8.1 7.3 1.2 Standard deviation 2.351702 1.923538 2.434132 2.729469 0.447214 C.V 34.28136 16.4405 30.05102 37.38998 37.2678 Minimum 4.75 9.5 6 5 1 Maximum 10.15 14 11 12 2 Source: Constructed from the respective company website From the above table no.1 is showing the dividend per share of blue chip companies in India. The total highest dividend per share in five years was paid by Hindustan Unilever limited (58.5). The lowest dividend per share was paid by WIPRO (6). The highest mean for five years was given by Hindustan (11.7). The lowest mean for five years was given by WIPRO (1.2).The highest standard deviation for five years was given by TCS (2.72).The lowest

Volume 12, Issue 4, 2021 Page No: 102 Compliance Engineering Journal ISSN NO: 0898-3577

standard deviation was given by WIPRO (0.44).The highest co-efficient of variation was given by TCS (37.38).The lowest co-efficient was given by Hindustan (16.44). The minimum value of all the five companies is between1 to 10 and the maximum value of all the five companies is between 2 to 14.

CHAT NO. 1 DPR - MINIMUM AND MAXIMUM OF SELECTED BLUE CHIP COMPANIES IN INDIA

25 20 14 15 11 12 10 10.15 MAXIMUM 9.5 5 4.75 6 5 MINIMUM 12 0

EARNINGS PER SHARE (EPS)

EPS is a financial ratio, which divides net earnings available to common shareholders by the average outstanding shares over a certain period of time. The EPS formula indicates a company’s ability to produce net profits for common shareholders. A single EPS value for one company is somewhat arbitrary. The number is more valuable when analyzed against other companies in the industry, and when compared to the company’s share price. Between two companies in the same industry with the same number of shares outstanding, higher EPS indicates better profitability. EPS is typically used in conjunction with a company’s share price to determine whether it is relatively “cheap” or “expensive”.

Earnings per share formula

There are several ways to calculate earnings per share. Below are two versions of the earnings per share formula

 EPS = (Net Income – Preferred Dividends) / End of period Shares Outstanding

 EPS = (Net Income – Preferred Dividends) / Weighted Average Shares Outstanding

TABLE NO.2 EARNINGS PER SHARE

Year ITC HINDUSTA RELIANCE TCS WIPRO

Volume 12, Issue 4, 2021 Page No: 103 Compliance Engineering Journal ISSN NO: 0898-3577

N INDUSTRIE S 2015-16 7.14 19.95 12.22 15.44 3.4 2016-17 6.93 19.15 13.48 16.27 3.1 2017-18 8.4 20.79 15.76 19.17 3.6 2018-19 9.2 24.25 17.31 21.65 4.17 2019-20 10.17 27.86 16.58 21.45 4.29 Total 41.84 112 75.35 93.98 18.56 Mean 8.368 22.4 15.07 18.796 3.712 Standard deviation 1.370792 3.619088 2.146183 2.871076 0.507021 C.V 16.38135 16.15664 14.24142 15.27493 13.65896 Minimum 6.93 19.15 12.22 15.44 3.1 Maximu m 10.17 27.86 17.31 21.65 4.29 Source: Compiled from the respective company website From the above table no.2 is showing the earnings per share of blue chip companies in India. The total highest earnings per share in five years were paid by Hindustan Unilever limited (112). The lowest earnings per share were paid by WIPRO (18.56). The highest mean for five years was given by Hindustan (22.4). The lowest mean for five years was given by WIPRO (3.71).The highest standard deviation for five years was given by Hindustan (3.61).The lowest standard deviation was given by WIPRO(0.50).The highest co-efficient of variation was given by ITC(16.38).The lowest co-efficient was given by WIPRO(13.65).The minimum value of all the five companies is between 3 to 20 and the maximum value of all the five companies is between 4 to 22.

Chart no.:2

EPS - MINIMUM AND MAXIMUM OF SELECTED BLUE CHIP COMPANIES IN INDIA

50

40 27.86 30 21.65 MAXIMUN 17.31 20 MINIMUM 10.17 19.15 10 12.22 15.44 4.29 6.93 3.1 0 ITC HINDUSTAN RELIANCE TCS WIPRO

Volume 12, Issue 4, 2021 Page No: 104 Compliance Engineering Journal ISSN NO: 0898-3577

DIVIDEND PAYOUT RATIO

The Dividend Payout Ratio (DPR) is the amount of dividends paid to shareholders in relation to the total amount of net income the company generates. In other words, the dividend payout ratio measures the percentage of net income that is distributed to shareholders in the form of dividends.

Dividend Payout Ratio Formula

There are several formulas for calculating DPR

 DPR = Total dividends / Net income

 DPR = 1 – Retention ratio (the retention ratio, which measures the percentage of net income that is kept by the company as retained earnings, is the opposite, or inverse, of the dividend payout ratio

 DPR = Dividends per share / Earnings per share

TABLE NO.3 DIVIDEND PAYOUT RATIO

RELIANCE Year ITC HINDUSTAN INDUSTRIES TCS WIPRO 2015-16 119.047619 80.2005013 85.92471 42.09845 29.41176 2016-17 68.5425685 88.772846 81.60237 43.02397 64.51613 2017-18 61.3095238 96.2000962 38.07107 31.2989 27.77778 2018-19 62.5 90.7216495 37.55055 23.09469 23.98082 2019-20 99.80334 50.25126 39.20386 55.94406 23.31002 Total 411.203054 406.146349 282.3526 195.4601 168.9965 Mean 82.2406109 81.2292699 56.47051 39.09201 33.7993 Standard deviation 25.8778086 18.2471377 24.96899 12.50137 17.35987 C.V 31.4659732 22.4637471 44.21598 31.97935 51.36162 Minimum 61.3095238 50.2512563 37.55055 23.09469 23.31002 Maximum 119.047619 96.2000962 81.60237 55.94406 64.51613

Source: From the respective company website From the above table no.3, is showing the dividend payout ratio of blue chip companies in India. The total highest dividend payout ratio in five years was paid by Hindustan ITC (411.20). The lowest dividend payout ratio was paid by WIPRO (168.99). The highest mean for five years was given by ITC (82.24). The lowest mean for five years was given by WIPRO(33.7).The highest standard deviation for five years was given by ITC (25.87).The lowest standard deviation was given by TCS(12.50).The highest co-efficient of variation was given by Reliance(44.21).The lowest co-efficient was given by Hindustan(22.46).The

Volume 12, Issue 4, 2021 Page No: 105 Compliance Engineering Journal ISSN NO: 0898-3577

minimum value of all the five companies is between 23 to 62 and the maximum value of all the companies is between 55 to 120. CHART NO:3 MINIMUM AND MAXIMUM OF SELECTED BLUE CHIP COMPANIES IN INDIA

200

150 119.047619 MAXIMUM 100 96.2000962 81.60237 MINIMUM 64.51613 50 55.94406 61.3095238 50.2512563 37.55055 23.09469 23.31002 0 ITC HINDUSTAN RELIANCE TCS WIPRO

FINDINGS AND SUGGESTIONS Table no.1 is showing the dividend per share of blue chip companies in India. The total highest dividend per share in five years was paid by Hindustan Unilever limited (58.5). The lowest dividend per share was paid by WIPRO (6). The highest mean for five years was given by Hindustan (11.7).The lowest mean for five years was given by WIPRO (1.2).The highest standard deviation for five years was given by TCS (2.72).The lowest standard deviation was given by WIPRO (0.44).The highest co-efficient of variation was given by TCS (37.38).The lowest co-efficient was given by Hindustan (16.44). The minimum value of all the five companies is between1 to 10 and the maximum value of all the five companies is between 2 to 14.

Table no.2 is showing the earnings per share of blue chip companies in India. The total highest earnings per share in five years were paid by Hindustan Unilever limited (112). The lowest earnings per share were paid by WIPRO (18.56). The highest mean for five years was given by Hindustan (22.4).The lowest mean for five years was given by WIPRO(3.71).The highest standard deviation for five years was given by Hindustan (3.61).The lowest standard deviation was given by WIPRO(0.50).The highest co-efficient of variation was given by ITC(16.38).The lowest co-efficient was given by WIPRO(13.65).The minimum value of all the five companies is between 3 to 20 and the maximum value of all the five companies is between 4 to 22.

Table no.3 is showing the dividend payout ratio of blue chip companies in India. The total highest dividend payout ratio in five years was paid by Hindustan ITC (411.20). The lowest dividend payout ratio was paid by WIPRO (168.99). The highest mean for five years was given by ITC (82.24).The lowest mean for five years was given by WIPRO(33.7).The highest standard deviation for five years was given by ITC (25.87).The lowest standard deviation was given by TCS(12.50).The highest co-efficient of variation was given by Reliance(44.21).The

Volume 12, Issue 4, 2021 Page No: 106 Compliance Engineering Journal ISSN NO: 0898-3577

lowest co-efficient was given by Hindustan(22.46).The minimum value of all the five companies is between 23 to 62 and the maximum value of all the companies is between 55 to 120. CONCLUSION It may be concluded that in the overall findings and suggestions the highest dividend per share is paid by Hindustan. The study of mean, standard deviation, co-efficient of variation and the maximum and minimum value of ITC, Hindustan, Reliance, TCS, WIPRO. Hindustan is said to have the highest of totals in each and every aspects. From this we can conclude that Hindustan Unilever limited has the highest dividend per share (DPS), Earnings per share (EPS), Dividend pay-out ratio (DPR). REFERENCES

Websites Visited

 https://shodhganga.inflibnet.ac.in/bitstream/10603/56903/1/ayan%20thesis.pdf  http://troindia.in/journal/ijcesr/vol5iss2part4/1-7.pdf  https://www.researchgate.net/publication/4991480_The_Role_of_Payout_Ratio_in_the_Relat ionship_Between_Stock_Returns_and_Dividend_Yield  https://m.economictimes.com/itc-ltd/stocks/companyid-13554.cms  https://www.moneycontrol.com/company-facts/hindustanunilever/dividends/HU  https://www.google.com/amp/s/www.financialexpress.com/amp/market/stock- market/reliance-industries-ltd-stock-price/  https://www.equitymaster.com/stock-research/financial-data/TCS/TCS-LIMITED- Detailed-Share-Analysis  https://www.macrotrends.net/stocks/charts/WIT/wipro/eps-earnings-per-share-diluted

Journals

Indian Journal of Accounting (IJA) 67 ISSN: 0972-1479 (Print) 2395-6127 (Online) Vol. 51 (2), December, 2019, pp. 67-72 by Dr. Jitendra Kumar*

Volume 12, Issue 4, 2021 Page No: 107