Dividend policy Analysis

(Eicher Motors)
Dividend is a payment made by a company to its shareholders
usually as a distribution of profits. When a company makes profit
it can either re-invest it in the business or it distributes it to its
shareholders by way of dividends. The dividend payout ratio is the
amount of dividends paid to shareholders relative to the amount
of total net profit of a company.
A reduction in dividends paid is not appreciated by investors and
usually the stock price moves down as this could point towards
difficult times ahead for the company. On the other hand a stable
dividend payout ratio indicates a solid dividend policy by the
company's management.
Column1
PBT
Reported Net Profit
Shares in issue
(lakhs)
Earning Per Share
(Rs)
DPS(Rs)
Equity Dividend (%)
Book Value (Rs)
Dividend payout
ratio

13-Dec
363.15
278.62
270.39

12-Dec
173.8
144.76
270.01

11-Dec
142.27
124.55
269.93

10-Dec
86.78
75.44
269.38

9-Dec
-48.51
37.53
126.6

103.04

53.61

46.14

28.01

29.64

30
300
303.76
0.291149

20
200
232.97
0.373065

16
160
200.07
0.346771

11
110
169.53
0.392717

7
70
306.85
0.236167

The company has tried to maintain the dividend payout ratio of

around 30-40%, indicating the company have the solid dividend
policy. Although from the year 2009 to 2010 company has
doubled the shares issue but its dividend per has also increased
with increasing earning per share signaling to the investors that
company has very good future prospect and its profits is

increasing significantly which will contribute to more capital gain

in future.

As we can see althouth the net profit in the year 2013 has almost
doubled but its has not rolled out the dividend accordingly rather
it has lowered the dividend payout ratio from 37.3% to 29.11%
signalling its might be retaining earnings for the purpose of more
investment and will provide more DPS in the future and the

company will be beneficial in the long run for the purpose of

capital gain.
Market reaction can be seen with with the huge increase in share
price from 2013 to 2015 because of its solid dividend policy and
the good future prospect.