Case Study on Dividend

Policy on Infosys
Infosys – Dividend Policy
• Infosys became a public limited company under the name of Infosys
Technologies Limited in June 1992. Infosys is a debt-free company as it
generates sufficient cash to finance all its operational and investing
requirements.
• The company has grown exponentially since its inception, and has happily
shared its success with its investors by adopting a continuously growing
dividend policy.
• The dividend payout trend at Infosys was around 10 per cent to 14 per cent
of its net profits till 1999.
• In 2000, the company declared an interim dividend of INR 2.50 per share of
par value of INR 5 each, (50 per cent of the face value). In 2001, it declared
a record interim dividend of INR 7.50 per share (150 per cent).
Infosys – Dividend Policy contd.
• In 2004, the company created history by making a record dividend
payout of 2,590 per cent to its shareholders. This included a special
one-time dividend of 2,000 per cent and a regular dividend of 590 per
cent.
• This was the single biggest dividend payout by any Indian private
enterprise. The special dividend of 2,000 per cent was a one-time
payment as the company crossed the USD1billion mark in revenues.
Besides the cash dividend, the company also paid a bonus of 3:1
stock.
• In 2005, Infosys declared a final dividend of INR 6.50 per share (130
per cent). Along with the interim dividend of INR 5 per share (100 per
cent), the total dividend for the financial year 2005 amounted to INR
11.50 (230 per cent), amounting to a total distribution of INR 3.098
billion.
• The company crossed the USD 2 billion revenue mark in 2006, and it
rewarded its shareholders with a 1:1 bonus and a special silver-jubilee
dividend of INR 30 per share, which amounts to 600 per cent on a par
value of INR 5 each. In 2007, it declared a dividend of INR 6.5 per
share (130 per cent on a par value of INR 5 per share).
• An interim dividend of INR 5 per share (100 per cent) was also
distributed. The total dividend inclusive of dividend tax was 19.9 per
cent, compared to 19.4 per cent in the previous year (2006).
• For the financial year 2008, the board of directors recommended a
final dividend of INR 7.25 per share, amounting to INR 4.15 billion.
• The company's board also recommended a special dividend of INR 20
per share, amounting to INR 11.44 billion.
• Including the interim dividend of INR 6 per share, amounting to INR
3.43 billion, the total dividend recommended for the year comes to
INR 33.25 per share, amounting to INR 19.02 billion
• Besides cash dividends, Infosys has also been distributing bonus
shares as dividends in kind. Bonus dividends distributed over the
years was 1:1 in 2006, 3:1 in 2004, 1:1 in 1999, 1:1 in 1997 and 1:1 in
1994.
• Infosys is an example of a company that has increased its dividend
payments with growth in its earnings.
• It is evident from its dividend policy that its dividend payouts are
linked to its financial performance. The company has been paying
dividends continuously since 1994, and its shareholders have been
adequately compensated with increasing dividends and regular bonus
issues.