ITC Limited is one of India’s leading consumer goods and conglomerate companies. This cigarette-to-hotel giant has built an impressive presence across sectors like tobacco, FMCG, hotels, paperboards, packaging, agri-business, and information technology over the last few decades.
With a market capitalization of over Rs 5 lakh crores, ITC ranks among the top 5 most valuable companies traded on the Indian bourses. But more than its size and scale of operations, ITC is hugely popular among a certain category of investors – dividend lovers! ITC has consistently rewarded its shareholders with liberal dividend payouts year after year, making it a favorite among income-seeking investors.
In this post, let’s take a closer look at why ITC figures are among the top dividend-paying stocks in India.
Reasons Why ITC is Beloved by Dividend Investors
ITC’s commitment to shareholder returns is evident in its long-standing dividend policy. Let’s explore the key reasons why ITC is favorite stock among divided lovers:
1. Strong and Consistent Dividend Payment History
ITC has an impeccable track record when it comes to rewarding shareholders with dividends. The company has consistently paid out dividends for over 20 years now. Over this period, it has disbursed close to 2.92% of its net profits to shareholders as dividends. Currently, ITC share price is Rs. 490.
Even during periods of low profitability in the late 90s, ITC continued with a dividend payout, underlining its shareholder-friendly credentials. For the year ending March 2024, ITC declared an equity dividend of 1375.00%, amounting to Rs 13.75 per share.
This long history of consistent payouts makes ITC a reliable stock to earn stable income.
2. Diversified Business Portfolio
While ITC is still best known for its tobacco products like cigarettes, its business portfolio today spans several sectors including FMCG, hotels, paperboards, packaging, agri-business and information technology.
ITC’s non-cigarette businesses generate roughly 25% of its segment revenue now. This provides a cushion against regulatory headwinds in the tobacco segment and reduces overall business volatility.
The diversified business mix also enables stability in earnings and cash flows, facilitating higher dividend payouts to shareholders.
3. Powerful Brand Equity and Distribution Reach
Over the years, ITC has built powerful brands across FMCG categories like personal care, food, education and stationery products. Brands like Aashirvaad (food), Sunfeast (biscuits), Bingo! (snacks), YiPPee! (noodles), Fiama and Vivel (personal care) enjoy strong brand equity amongst Indian consumers. The company’s brands reach 250 million Indian households, leveraging its established distribution network and consumer insights.
Backed by its deep distribution network reaching 6 million retail outlets, ITC has established market leadership in many FMCG categories. This provides earnings stability and the capacity to sustain dividends in the long run.
4. Strong and Stable Financial Performance
ITC has delivered consistent revenue growth, profitability and strong cash generation year after year. This is reflected in performance metrics like revenue.
It has a Gross Revenue of ₹69,446 crores and Net Profit of ₹20,422 crores as of March 2024. The combination of steady earnings growth at a CAGR of 8% in the last 4 years, strong balance sheet and efficient capital allocation reinforces ITC’s ability to continue rewarding shareholders.
5. Shareholder-Friendly Policies
ITC has framed its corporate governance policies to create long-term value for shareholders. Initiatives like the ITC Dividend Distribution Policy and focus on distributing surplus cash underline its shareholder-friendly approach. The combination of regular dividends and buybacks makes ITC a dependable pick for income-focused investors and also an outstanding value stock in nifty fifty today.
Conclusion
With its track record of consistent dividend payouts, diversified business mix, strong brand equity, robust financial performance, and shareholder-friendly policies, ITC remains a hot favorite among dividend-stock investors in India.
