Analysis of Dividend Paid by the Company in Last Five Years and Feasibility of Investment in the Company

...

- Cash dividend: These dividends are paid in currency through electronic funds transfer or a printed cheque

- Stock or scrip dividend (Bonus share): These dividends are paid to the shareholders in the form of additional stock shares

- Property dividend: These dividends are paid to the shareholders in the form of assets, but these types of dividends are relatively rare

- Share repurchase: Share repurchase takes place when the issuing company intends to buy back its own shares from the market from investors.

- Interim dividend: Interim dividends are dividends that are declared and paid to the shareholders of a listed company before the conduct of Annual General Meeting (AGM) of the company and declaration of its financial statements

- Final dividend: The final dividend is paid by a listed company to its shareholders after the conduct of the Annual General Meeting (AGM) of its Board of Directors and after the consolidated financial statements of the company are declared

Year End

Dividend Amount (INR in Crores)

Dividend (%)

Dividend Yield (%)

15-Mar

13,074.88

207

5.71

14-Mar

18,317.46

290

10.07

13-Mar

8,842.91

140

4.53

12-Mar

6,316.36

100

2.91

11-Mar

2,463.38

39

1.12

Analysis of dividend (source: www.capitaline.com):

[pic 3]

[pic 4]

From the above graphs, it can well be gauged that cash flow (CEPS) of Coal India Limited is in a healthy position and has increased over the last five years, whereas the net income from shares (EPS) has also steadily increased over the years without having displayed a steep elevation or depression. Also, the steady growth in dividend distribution by the company over the last five years has boosted the morale of both retail and long term investors and they, in turn, had placed their faith on the company. After a more or less steady growth in dividend payout from 2011 to 2014, there is a steep rise in dividend distribution for the year 2014-2015, which can be attributed to the five present offloading of government stake in the company through “Offer for Sale” (OFS). After the humongous misappropriation in coal block allocation popularly known as the “Coal Gate Scam” in India came to the fore and the investigations following thereafter under the jurisdiction of Hon. Supreme court of India post government change at the center, development of captive coal blocks by private players almost came to a standstill. In that situation, the beneficiary sectors such as cement, steel, fertilizer and textile industries had to import coal as Coal India Limited was not able meet the demand of electricity sector, which is considered to be the primary customer and consumer of Coal India Limited, leave alone the secondary consumers. This is reflected from the dip in sales, operating profit, Profit Before Tax (PBT) and Profit After Tax (PAT) in the year 2014-2015 (source: www.capitaline.com) and hence the dip in dividend too.

Summary:

Following points make Coal India Limited a lucrative destination to investment for myself as well as other shareholders, both retail and long term investors:

- Past track record of steady and robust dividend payment

- Increasing Earning Per Share (EPS) and Cash Earning Per Share (CEPS) year on year

- Recent announcement by board of Coal India Limited for share buyback

- Industry friendly policies of central government leading to faster environmental and other clearances and the subsequent development of coal blocks by Coal India Limited as majority of the coal blocks went to it owing to the disqualification of many private players post the “Coal Scam”

- Fall in imports of coal by industries, including private industries so on so that as of today, Coal India Limited supplies to all the thermal power plants in the country which now maintain a coal stock of 27 days as against 2 days few years ago

- Pick up in production and dispatch volumes by Coal India Limited which stood at 8.6 % and 8.8 % respectively for the year 2015-2016 (source: www.economictimes.com)

- Faster sale and dispatch of remaining coal inventory by Coal India Limited with the implementation of e-auction, which has hugely benefitted small scale industries like sugar mills, textile plants etc.

- Restructuring of cash starved state electricity boards under the “Ujwal Discom Assurance Yojana” (UDAY) of central government, which curb their business prospects due to inability to pay

Bibliography:

- www.capitaline.com

- www.moneycontrol.com

- www.economictimes.indiatimes.com