dividend policy, comparison of dividend payout ratio for 4 banks

1. DIVIDEND POLICY OF BANKING SECTOR
Presented by:
Sofia 14MBA 1305
Vishali Ghamta 14MBA 1350
Minni Arora 14MBA1403
Manpreet Kaur 1402
•HDFC BANK
•ICICI BANK
•AXIS BANK
•ING VYASYA
BANK

2. DIVIDEND POLICY
 Concerned with financial policies regarding
paying dividend to the Equity shareholders.
 Whether to issue dividends, and what amount,
is determined on the basis of company’s
profit(excess cash)
 Influenced by the company’s long term earning
power.
 Surplus earnings may be paid as in the form of
cash dividends or to repurchase the company’s
stock through a share buyback program.
Source: www.investopedia.com

3. DIVIDEND PAYOUT RATIO
 Dividend payout ratio is calculated by
dividing the dividend per share(DPS) with
earning per share(EPS).
 It shows that which part of EPS is paid to the
shareholders and the other part is retained
by the business for expansion.
 Formula D/P ratio: DPS
EPS

4. FACTORS AFFECTING DIVIDEND POLICY
 Growth: Firm with strong growth prospects maintain low payout
ratio.
 Liquidity: Since dividends represent a cash outflow, it follows
that the better the cash position and overall liquidity of the firm,
the greater is the firm’s ability to pay (and maintain) a cash
dividend.
 Access to Capital market: If a company’s ability to make a new
issue of shares or to issue debt is restricted, it is likely that it will
retain a higher proportion of its profits than a company which has
ready access to funds from the capital market.
 Inflation: Inflation causes it to have to invest substantially more
to replace existing equipment, finance new capital expenditures,
and meet permanent working capital needs. Thus, in inflationary
times, there may be a tendency to hold down cash dividends.
Source: http://www.yourarticlelibrary.com/

5. COMPARISON OF DIVIDEND PAYOUT RATIO
19.55 19.52 19.46 19.38
31.3
29.41
27.71 27.01
16.91
15.51 16.29
15.11
11.39
15.05
0
17.36
0
5
10
15
20
25
30
35
2011 2012 2013 2014
HDFC Bank
ICICI Bank
Axis bank
ING vyasa bank
Source:
www.moneycontrol.co

6. CONCLUSION
 ICICI bank have the highest payout ratio and
lowest is for ING VYASYA bank
 HDFC bank have a constant payout ratio.
 In year 2014 highest ratio of earning as dividend
is paid by ICICI Bank and lowest is paid by Axis
Bank.
 The highest payout ratio of HDFC shows that
the bank is having a better cash position and
overall liquidity, on the other hand hdfc may be
having easy access to finance from the other
sources of finance.

7. THANK YOU