DIVIDEND POLICY OF BANKING SECTOR

Presented by: Sofia 14MBA 1305

Vishali Ghamta 14MBA 1350Minni Arora 14MBA1403

Manpreet Kaur 1402

•HDFC BANK•ICICI BANK•AXIS BANK•ING VYASYA BANK

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

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

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/

COMPARISON OF DIVIDEND PAYOUT RATIO

2011 2012 2013 20140

5

10

15

20

25

30

35

19.55 19.52 19.46 19.38

31.329.41

27.71 27.01

16.9115.51 16.29 15.11

11.39

15.05

0

17.36HDFC BankICICI BankAxis bankING vyasa bank

Source: www.moneycontrol.com

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.

THANK YOU