2. Name of the Student: Dipan Rajbanshi
Class : 3rd year B.Com honours
Collage Roll No. : C 57
C.U. Roll No. : 1621 - 61 - 4002
Registration No. : 621-1122-0299-15
Title of The Project: A Study of Dividend distribution of ITC ltd.
About project:
1.1 Background of Study:-
Dividend policy one of the major decision of financial Management. A farm employs its financial resources in production and distribution activity to earn
profit which is distributed as dividend among the shareholders. Again the farm retains a part of surplus profit for investment in future projects
expansion of the business. The dividend decision is important because it stablishes whole situation of the company among the shareholders and
increases the value of the farm. Dividend can be paid in deferent forms such as cash dividend bonus dividend, stock dividend, property dividend, scrip
dividend.
By the dividend policy means a set of guidelines which a company uses to decide how much of its earnings it will pay-out to its shareholders.
I have chosen this project “A STUDY OF DIVIDEND DISTRIBUTION OF ITC LTD.” because I want to analyse the trend of dividend payment of the
company. It’s relation with profit earning capacity of the farm and also impact of dividend decision on the shareholder’s value and goodwill of the farm.
One of the simplest ways of companies to communicate financial well-being and shareholders value is to say “the dividend cheque is in the mail.”
Dividend is distributed out of cash profit and company pays dividend regularly out of its earning. It convey a clear and powerful maser of current
business performance and future prospects of growth of the company. Company’s willingness and ability to pay consistent and steady dividend over
long span of time is a good indicator of its consistent financial performance. Allies its ability to increase the amount of dividend to the shareholders
provide a good Clause about its fundamentals. Dividends serve as announcement of the company’s success and sustainability. A company has
tradeoff between dividend policy for maximization of business value and goodwill. A part of goodwill depends on dividend distribution of a company. If
any company pays good dividend, the market price of share and create confident among the shareholders about these company.
3. Source: www.moneycontrol.com Source: Annual report
1.2 REVIEW OF LITERATURE
I have mainly studied the different annual reports of ITC.LTD for collecting and understanding financial information and explanations. I have also
studied text books and reference books on financial statement analysis of renewed authors for understanding the theoretical discussion on the
subject. For my project data analysis, I obtained data from website of moneycontrol.com in the internet for preparation in my project.
1.3 Objective of study
To study the theoretical aspects of dividend policy including various dividend models.
To study the trend of earnings and dividend Payment of ITC .Ltd. during the study period and also the nature of dividend payment.
To calculate important ratios of dividend payment decision.
To evaluate the performance of the company regarding earning capacity, dividend payment and shareholders value.
To offer concluding remarks and recommendation.
1.4 Collection of Data and Methodology:-
One study has been based on the basis of secondary data collected from various books, journals, magazines, reports, newspapers, etc. we have
also collected data from the source of company’s website and from some other websites. The collated data have been arranged in various tables &
charts and there after analyzed with the help of various simple statistical tools as for example Ratio analysis, study of dividend policy. We have
used column-chart to present the date in a more comprehensive manner. Finally some findings have been gathered to establish our objectives.
1.5 Limitation of the Study:-
While caring out our study we have faced so many problems.
First, the first and most is how to introduce this project in shortage time of fact, we have not sufficient time for depth analysis, interim comparison
and other analysis of data. This has indeed restricted our study to our satisfaction.
Second, there was a problem of cost involved in earning out the project. The reason for recollection of primary data was the cost involved
associated with this.
As the secondary data are collected through internet therefore, the reliability of the data is questionable.
4. Source: www.moneycontrol.com Source: Annual report
ITC Ltd. is one of India’s most admired and valuable companies
Market Capitalization:~Rs. 3.2 lakh crore
A US$ 8 billion enterprise by Revenue
~58% of Net Revenue from non-cigarette segments
Leading first moving consumer goods (FMCG) marketer in India
Established several world-class brands in the last 10 years
10 year value addition ~Rs. 2.8 lakh crores (US$51 billion). 75% of the incremental value-added accrued to
the Exchequer over the last 5 years.
Among the top tax payers in the country
ITC and its group companies employ over 32,000 people directly, Sustainable development models and value
chains have supported creation of ~6 million sustainable livelihoods
A global exemplar in sustainable business practices
Only Enterprise in the world of comparable dimensions to have achieved and sustained the 3 Key global
indices of environmental sustainability of being ‘water positive’ (for 15 years), ‘carbon positive’(for 12
years), and ‘solid waste recycling positive’ (for 10 years)
5. Annual consumer spends of nearly14000 crore ( as per finical year 2016-17)
Source: www.moneycontrol.com Source: Annual report
6. Source: www.moneycontrol.com Source: Annual report
ITC named India's 'Buzziest‘ Corporate brand by afaqs!, the
country's leading media portal
Vivel featured among the top 10‘Buzziest brands’ across
categories
Vivel, Engage and Fiama featured among the Top 5 in the
Personal Care segment. Savlon ranked No.2 in the OTC
category
John Players won top awards at Goa Fest 2016 (Creative
ABBY Awards) for innovative use of image/design and
social media content
Wills Lifestyle was recognized at the 2016 DMAi
CREATEFFECT Awards for creativity in ‘Interactive
Experiential Marketing’
Sunfeast, Bingo! And Yippee! Featured among the Top 5 in
the Foods category
Savlon Healthy Hand Chalk Sticks campaign won 7 Lions at
Cannes 2017
7. Source: www.moneycontrol.com Source: Annual report
235.21
217.21 218.81
280.3 272
2013-14 2014-15 2015-16 2016-17 2017-18
4.1. MARKET PRICE OF SHARES
Items 2013-14 2014-15 2015-16 2016-17 2017-18
Earnings for shareholders (in crore) 8785.21 9607.73 9844.71 10200.9 11223.25
Payment of Dividend( in crore) 4,771.91 5,009.70 6,840.12 5,770.01 6,285.21
Percentage of dividend in respect of profit
54.31754
1 52.14239
69.48015
7
56.56373
5
56.00169
2
0
10
20
30
40
50
60
70
80
0
2000
4000
6000
8000
10000
12000
2013-14 2014-15 2015-16 2016-17 2017-18
Payment of dividend
Earnings for share holders (in crore) Payment of Dividend( in crore)
Percentage of dividend in respect of profit
8. Comments:-
In our analysis Earning per share shows the available earnings of the company to distribute among shareholders at per share. In
ITC.LTD it is notified that in 2013-14, EPS was Rs.11.05 then in 2014-15, it grew to Rs.11.99 and after that year in 2015-16, it
grew to Rs.12.23 and then it reduced to Rs.8.4. and increased to RS.9.23 So in our analysis the growth of EPS of the company is
becoming fluctuating at the ending of last 5 years.
1.1Earnings per share (EPS):-
Earnings per share are the portion of a company’s profit allocated to each outstanding of common share of common stock Earning Per share as an indicator of a company’s
profitability. Earnings per share can be calculated by using the following formula
Earnings per Share = Earnings available for Equity shareholders /Number of Equity Shares
1.1Earnings per Share of last 5 years and its changes in %
Items In crores
2013-14 2014-15 2015-16 2016-17 2017-18
Earnings
available for
equity
Shareholder
s
8785.21 9607.73 9,844.71 10,200.90 11223.25
Number of
shares
795.3182950 801.5519541 804.7206911 1,214.7383071 1,214.7383071
Earning Per
Share
11.05 11.99 12.23 8.40 9.23
Changes In
EPS (In
percentage)
17.68% 8.51% 2% 31.32% 9.88%
11.05 11.99 12.23
8.4 9.23
17.68%
8.51%
2%
31.32%
9.88%
0.00%
10.00%
20.00%
30.00%
40.00%
2013-14 2014-15 2015-16 2016-17 2017-18
In crores
0
5
10
15
Earning per Share and its Change in
Percentage
Earning Per Share Changes In EPS In %
9. 1.2 Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary share outstanding. Dividend per share is the total dividends paid out by a business,
including interim dividends, divided by the number of outstanding ordinary shares issued.
Dividend Per Share (DPS) =Total Equity Share Dividend / Number of Equity share
Dividend Per share of ITC .ltd of 5 years and percentage of changes
Table No:- 1.2
Chart showing amount of dividend per share and percentage of change in DPS
Comments:-
In our analysis we see that in 2013-14, DPS was Rs. 6 and in 2014-15, it grew to Rs.6.25 and then in 2015-16, it grew to Rs 8.5
and in 2016-17, DPS of the farm decreased to Rs. 4.75. And it increased to RS. 5.15. That shows the DPS of the company has
an increasing trend in except in 2016-17. In our analyzing period.
Items
Financial Year 2013-14 2014-15 2015-16 2016-17 2017-18
Total Equity Share Dividend Paid (in Crore) 4771.91 5009.7 6840.12 5770.01 6285.21
Total number of equity share(in crore) 795.318295 801.5519541 804.72069 1214.74 1220.429
Dividend per Share 6 6.25 8.5 4.75 5.15
Change in DPS(Percentage) 14.29 4.17 36 -44.12 8.42
6 6.25
8.5
4.75 5.1514.29
4.17
36
-44.12
8.42
-60
-40
-20
0
20
40
60
0
2
4
6
8
10
2013-14 2014-15 2015-16 2016-17 2017-18
Dividend Per Share and its Change in
Percentage
Dividend per Share Change in DPS(Percentage)
10. 1.3 Dividend payout ratio is the ratio of the total amount of dividend paid out to shareholders relatives to net income of the company. It is the percentage of earning paid to shareholders in
dividend.
Dividend payout ratio=Dividend Per Share / Earning Per Share
Dividend payout ratio of ITC .ltd of last 5 years and its percentage of changes.
Comments:-
Our analysis shows that in 2013-14, DP ratio was 0.54 and then in 2014-15 it decreased slightly to 0.52 and then in
2015-16, it increased by 33.33 per cent and then in 2016-17, it decreased to 0.57 and in 2017-18 The dividend
payout ratio decreased to 0.56 So according to our analysis the DP Ratio of ITC LTD. is fluctuating in our analyzing
period.
Dividend pay-out ratio
Sl.No. Items
1 Financial Year 2013-14 2014-15 2015-16 2016-17 2017-18
2 Dividend Per Share(Rs.) 6 6.25 8.5 4.75 5.15
3 Earning Per Share(Rs.) 11.05 11.99 12.23 8.4 9.23
4 Dividend pay-out ratio 0.54 0.52 0.70 0.57 0.56
5 Change in D/P(Percentage) -2.88 -4.00 33.33 -18.64 -1.33
0.54 0.52
0.70
0.57 0.56
-2.88 -4.00
33.33
-18.64
-1.33
-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
2013-14 2014-15 2015-16 2016-17 2017-18
Dividend Payout Ratio and its Change in
Percentage
4 Dividend payout ratio 5 Change in D/P(%)
11. 1.4 The retention ratio is the portion of earnings kept back in the business as retained earnings. The retention ratio refers to grow the business
rather than being paid out as dividends. It is the opposite of the payout ratio which measures the percentage of earnings paid out to shareholders
as dividends. On a per Share basis.
Retention ratio=Net Income-Dividends/Net Income
Comments:-
In our analysis in the year 2013-14, it was 0.4568 and in 2014-15 it grow to 0.4786 and in 2015-16, Company’s retention
ratio is decreased to 0.3052 and in 2016-17 this ratio grew to 0.4344 Then in 2017-18 Retention ratio increased to 0.4400 In
our analysis this company’s retention ratio has a fluctuating trend.
Serial
No. Items
1 Financial Year 2013-14 2014-15 2015-16 2016-17 2017-18
2 Net Income(in crore)
8,785.21 9,607.73 9,844.71 10,200.90 11,223.25
3 Dividend(in crore) 4,771.91 5,009.70 6,840.12 5,770.01 6,285.21
4
Net income -Dividend
(in Crore) 2-3 4013.3000 4598.0300 3004.5900 4430.8900 4938.0400
5 Retention Ratio 4/5(crore) 0.4568 0.4786 0.3052 0.4344 0.4400
6
Change in Retention ratio
(Change In Percentage) -3.6384 -4.7615 36.2278 -42.3214 -1.2939
0.4568
0.4786
0.3052
0.4344 0.4400
-3.6384
-4.7615
36.2278
-42.3214
-1.2939
2013-14 2014-15 2015-16 2016-17 2017-18
-50.0000
-40.0000
-30.0000
-20.0000
-10.0000
0.0000
10.0000
20.0000
30.0000
40.0000
50.0000
0.0000
0.1000
0.2000
0.3000
0.4000
0.5000
0.6000
2013-14 2014-15 2015-16 2016-17 2017-18
Retention Ratio
5 Retention Ratio 4/5(crore) 6 Change in Retention ratio
(Change In Percentage)
12. Comments:-
In the year of 2013-14, the DP ratio was 0.54 and that the retention ratio was 0.46 and then in 2014-15, the DP ratio decreased
to 0.52 and so the retention ratio increased to 0.48 and then in 2015-16, The DP ratio increased to 0.70 and in that year for that
cause the retention ratio decreased to 0.30 and in the year 2016-17, the DP ratio is decreased to 0.57 and for that cause the
retention ratio decreased to 0.43 and the last financial year DP ratio Decreased to 0.56 and the Company retained 0.44 portion of
the earnings. So in our analyzing period we can see that the DP ratio of the company has a flaunting trend till the financial year
2017-18. And then the DP ratio has increased. And this has an impact on fluctuating trend of the retention ratio.
1.5. Comparison and relation between Dividend payout ratio and Retention ratio:-
Analysis of Dividend pay-out ratio and Retention Ratio Side by Side
Financial Year 2013-14 2014-15 2015-16 2016-17 2017-18
Dividend Pay-out Ratio 0.54 0.52 0.70 0.57 0.56
Retention Ratio 0.46 0.48 0.30 0.43 0.44
Total 1 1 1 1 1
0.54 0.52
0.70
0.57 0.56
0.46 0.48
0.30
0.43 0.44
2013-14 2014-15 2015-16 2016-17 2017-18
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
DP Ratio And Retention Rato
Dividend Payout Ratio Retention Ratio
13. 1.6 Dividend Yield Ratio:-
Dividend yield ratio is a financial ratio that measures the amount of cash dividend distributed to common shareholders relative to market value per share the dividend yield is used
by the investors to show how their investment in stock is generating either cash flows in assets value or stock application.
Dividend Yield Ratio: Cash dividend per share /Market value per share
Comments:-
In my analysis it is found that there is stable increasing dividend in the 1st 2 years. And then it went up to 0.028 and reached
its peak position in the year 2015-16, it signifies annual dividend for cost of capital for investment and attractiveness in
investment in company’s share. Here the company’s market price per share fluctuates enough to show wrong trend of
dividend yield ratio, which is not a result of dividend growth. So it is not encouraging shareholders
Sl.No Items 2013-14 2014-15 2015-16 2016-17 2017-18
1 Cash Dividend Per Share 6 6.25 8.25 4.75 5.15
2 Market Value Per Share 235.21 217.21 218.81 208.3 272
3 Dividend Yield Ratio(1/2) 0.0255 0.0288 0.0377 0.0228 0.0189
4
Change in DYR(In
Percentage) 0.2290 12.7989 31.0348 -39.5192 -16.9702
0.0255
0.0288
0.0377
0.0228
0.01890.2290
12.7989
31.0348
-39.5192
-16.9702
-50.0000
-40.0000
-30.0000
-20.0000
-10.0000
0.0000
10.0000
20.0000
30.0000
40.0000
0.0000
0.0050
0.0100
0.0150
0.0200
0.0250
0.0300
0.0350
0.0400
2013-14 2014-15 2015-16 2016-17 2017-18
Dividend Yield Ratio
3 Dividend Yield Ratio(1/2) 4 Change in DYR(In Percentage)
14. 1.7 The price earning ratio is the current share price relative to its pre-share earnings. The price earning ratio is also known as price multiple or the earning multiple.
Price Earning ratio = Market Value Per Share/Earning Per Share
Comment:-
It is a valuation ratio and it signifies the internal strength of the company as an earning multiplier. It indicates growth in EPS due to change in MPS and
build-ups shareholder’s confidence.
In my analysis it is found that P/E Ratio decreased gradually form the first year for fluctuating MPS. In 2016-17 it moved up due to higher MPS but lower
EPS. This was for perhaps the effect of company’s enhanced goodwill and status for declaration of bonus and regular dividend in the last five years.
However P/E ratio may be effected by the external factors like Economic condition of the business and economy of the country.
# Financial year 2013-14 2014-15 2015-16 2016-17 2017-18
1 Market price per share 235.21 217.21 218.81 280.3 272
2 Earnings per share 11.05 11.99 12.23 8.4 9.23
3 Price Earning Ratio(1/2) 21.2860 18.1159 17.8913 33.3690 29.4691
4
Change in P/E
Ratio(Percentage) -3.1049 -14.8926 -1.2402 86.5104 -11.6873
21.2860
18.1159 17.8913
33.3690
29.4691
-3.1049
-14.8926
-1.2402
86.5104
-11.6873 -20.0000
0.0000
20.0000
40.0000
60.0000
80.0000
100.0000
0.0000
5.0000
10.0000
15.0000
20.0000
25.0000
30.0000
35.0000
40.0000
2013-14 2014-15 2015-16 2016-17 2017-18
Price Earning Ratio & Change in %
3 Price Earning Ratio(1/2) 4 Change in P/E Ratio(%)
17. Findings of the study
• In our study It is found that in 2013-14 Earnings of the company was Rs.8785.21 crore then in 2014-15 it increased to
Rs.9607.73 crore and in 2015-16the profit of the company increased to 9844.71 crore and then in 2016-17, the profit of the
company 10200.90 crore and in 2017-18, profitability position was increasing gradually. And the profit was Rs.11223.25
Crore. So the profitability of ITC Ltd. was on increasing trend.
• The earning per share of ITC ltd. in 2013-14, was Rs.11.05 and then earning per share increasing in next 2 years. In 2014-15,
EPS increased to Rs.11.99 then in 2015-16 It increased to Rs. 12.23 and then in 2016-17, Eps Decreased to Rs. 8.40 because
the profit was not increasing proportionately with the increase of number of share. And again in next year EPS increased to
Rs 9.23 due to increase in profit of the company.
• In my analyzing period the payment of dividend in the year 2013-14, 4771.91 crore and in 2014-15 payment of dividend was
increased to 6840.12 crore and then in the year 2015-16, the dividend of the farm was decreased to 5770.40 crore. In this 5
years the payment of dividend has an increasing trend up to the first 3 years but in the year 2016-17 payment of the
dividend was decreased. Company’s dividend payment is increasing with increasing level of distributable profit. In the year
2017-18. The Nature of dividend payment in consistently increasing except in the year 4th year.
18. 1. Dividend payout ratio:
• In our study period it is found that D/P ratio showed a fluctuating trend. Although dividend payment was regular with incremental amount. The Dividend per Share of the company
could not grew with the growth of Earning per Share. This is due to policy of high retention ratio and Unfortunate increase in company’s number of shares.
• Generally High dividend payout ratio is good for investors seeking short term investment but it has negative impact on liquidity position. Generally growing and matured company
pay high dividend. On the other hand low dividend is desired by investors seeking long term capital growth. Generally new companies prepare low payment of dividend and
plowing back of profits.
• Here the company has adopted mixed policy.
• Company’s dividend policy depends on cash earning per share available from business activities. D/P ratio depends on cash dividend payable out of available cash profit.
• Dividend yield ratio:
In my analysis it is found that there is stable increasing dividend in the 1st 2 years. And then it went up to 0.028 and reached its peak position in the year 2015-16, it signifies
annual dividend for cost of capital for investment and attractiveness in investment in company’s share. Here the company’s market price per share fluctuates enough to show
wrong trend of dividend yield ratio, which is not a result of dividend growth. So it is not encouraging shareholders and from the point of view of long-term earnings prospects of
the company.
Dividend yield ratio signifies annual dividend for investment and attractiveness of investment in company’s stock. It affected by fluctuation in MPS. It is actually measure of
return on Investment for long term earnings. Generally old and matured company’s share less risky it stabled. Earning in dividend. It is actually the measure of cost of capital of
the business.
Price Earning Ratio:
• It is a valuation ratio and it signifies the internal strength of the company as an earning multiplier. It indicates growth in EPS due to change in MPS and
build-ups shareholder’s confidence.
• In my analysis it is found that P/E Ratio decreased gradually form the first year for fluctuating MPS. In 2016-17 it moved up due to higher MPS but lower
EPS. This was for perhaps the effect of company’s enhanced goodwill and status for declaration of bonus and regular dividend in the last five years.
• However P/E ratio may be effected by the external factors like Economic condition of the business and economy of the country. Market capitalization
• By Market capitalization Means total volume of equity share capital on mobilization in market which is found by multiply the number of share prevailing
MPS (Market price per share). We observe that company’s market capitalization (which is the product of MPS and number of share) has shown an
upward trend. So it has no direct relation although it helps in increasing market price of the share due to stable dividend policy.
19. 0 Effects of growth of ITC ltd.
Goodwill of the company has a stable potion due to regular payment of dividend. For a good position of goodwill, the new issue
prospects of the company always has a good response and acceptance from the stakeholders of the company.
In wealth creation in India ITC ltd has ranked at 5th position. As per Business Today in the year 2002.
Issues of the ITC ltd. globally accepted by the international markets.
Company’s dividend yield declined in spite with growing market capitalization. It shows poor profitability and dividend payment.
Marker capitalization of ITC ltd. as of June 30, 2017, On BSE stood at Rs.393393 crore. The stock touched its record high of Rs.353.20
per share up by 9.06%. As per this record high, the market capitalization of ITC ltd. stands at Rs. 429045.56 crore.
20. Conclusions and Recommendations
Conclusions:-
The company has a good dividend track report and has consistently declared dividends for the last 5 years. As per the Profit & Loss account
The company has recommended a Special Dividend of Rs. 1.65 per Ordinary Share of Re. 1/- each and a Dividend of Rs. 2.80 per Ordinary
Share of Re.1/- each. As on 20-05-2011 and that was paid on 10-06-2011.
Thus it can be said that the earning per share was increased continuously but in the year 2016-17 it was decreased.
Goodwill of the company has a stable potion due to regular payment of dividend. For a good position of goodwill, the new issue prospects of
the company always has a good response and acceptance from the stakeholders of the company.
In wealth creation in India ITC ltd has ranked at 5th position. As per Business Today in the year 2002.
Issues of the ITC ltd. globally accepted by the international markets.
In Table No. 4.10 we can see that the company is giving a good amount of Cash dividend from a good amount of Cash Profit. And also shows
that the Cash Profit of the company and Cash Dividend of the company directly affected to each other.
Recommendation:
Company should maintain stable dividend policy for growth, market capitalization and future issues. The reputation of the company to the
shareholders largely depends on regular payment of dividend, bonus issue and right issue.
Company should accumulate reserve and surplus.
Company should consistently retain a portion of the generated profit for expansion in future projects.
Company should diversify its business and product profit for greater profitability and sustainability of the business.
Company’s earning per share should be improved by higher level of profit in relating to growing number of share and retention policy.
