TCS Dividend Payment History Analysis and Insights

In this post I will talk about TCS dividend payment history and discuss how a carefully crafted dividend investing strategy can result in bumper yields, apart from capital appreciation.

A brief about TCS

Tata Consultancy Services (TCS) is India’s largest software company and also the most valuable company with market capitalization of Rs 4.88 lakh crore. TCS came out with an initial public offering (IPO) in August 2004, and since then has given two 1:1 bonus offerings. The unadjusted IPO price of Rs 850 translates to Rs 212.5. Since then the stock price has increased to Rs 2500, for an almost 10x or 26% CAGR in 10 years. But that is only one part of the story .. the other part is dividend.

The Year is 2005 ..

You have come back from USA after a 2-years stint. You are flush with money and you are itching to do something with your dosh, specifically Rs 3 lakhs. You have 4 options now:
a. invest the Rs 3 lakhs in a Fixed Deposit/ NSC or other government fixed income products
b. invest the money in stocks
c. online trading
d. spend it

In this article, I will take up the first 2 cases and show how investing in a “good” stock is better than a FD, even from a dividend point of view.

Here are the investment details:

Date of Purchase 31-Mar-05
Price (Adjusted)                  270
Shares              1,111
Investment          300,000

TCS Dividend Payment History

Dividend is a perecntage of profit paid to a shareholder. If a company makes Rs 10 lakhs profit and decides to give back 60% to investors, the dividend is Rs 6 lakhs. If you own 10% of the company, you will get 10% of Rs 6 lakhs, that is Rs 60k.

A good company is expected to increase its profits. Hence it is expected that your dividedns will increase over a period of time.

Now TCS is a “good” company by almost all standards – its profits (EPS) and dividends (DPS) have goneup steadily over the years.

Year Dividend Per Share After Adjustments Growth
2006                                  3.4
2007                                  3.3 -4%
2008                                  7.0 115%
2009                                  7.0 0%
2010                                10.0 43%
2011                                14.0 40%
2012                                25.0 79%
2013                                22.0 -12%
2014                                32.0 45%
2015                                79.0 147%

Average yearly dividend growth has been 50%.

How much did you make?

The table below shows how much dividend income you made from 2006 to 2015. The column Dividend Yield on Cost (DYOC) is calculated as follows:

DYOC = Dividend in a Year/ Initial Investment

This is the same as interest rate of a fixed income product.

Interest Yield = Interest in a Year/ Initial Investment

Year DPS Dividend DYOC
2006        3.4            3,750 1.3%
2007        3.3            3,611 1.2%
2008        7.0            7,778 2.6%
2009        7.0            7,778 2.6%
2010      10.0          11,111 3.7%
2011      14.0          15,556 5.2%
2012      25.0          27,778 9.3%
2013      22.0          24,444 8.1%
2014      32.0          35,556 11.9%
2015      79.0          87,778 29.3%

As you can see, the DYOC is only 1.3% in Year 1, but it goes up to a staggering 29% in Year 10. Which FD will give you 29% .. tell me, I am eager to listen.

Here is what you would have made had you invested the Rs 3 lakhs in a FD payig 8% per annum.

Year Rate Interest
2006 8%      24,000
2007 8%      24,000
2008 8%      24,000
2009 8%      24,000
2010 8%      24,000
2011 8%      24,000
2012 8%      24,000
2013 8%      24,000
2014 8%      24,000
2015 8%      24,000

Now comes the best part …

We have seen TCS Dividend Payment History above. What if we now try to forecast the estimared dividends for next 10 years. To keep things simple, we will simply assume a very low conservative 10% growth from 2016 to 2025.

Type Year DPS Dividend DYOC FD Interest
Actual 2006        3.4            3,750 1% 8%
Actual 2007        3.3            3,611 1% 8%
Actual 2008        7.0            7,778 3% 8%
Actual 2009        7.0            7,778 3% 8%
Actual 2010      10.0          11,111 4% 8%
Actual 2011      14.0          15,556 5% 8%
Actual 2012      25.0          27,778 9% 8%
Actual 2013      22.0          24,444 8% 8%
Actual 2014      32.0          35,556 12% 8%
Actual 2015      79.0          87,778 29% 8%
Forecast 2016      86.9          96,556 32% 8%
Forecast 2017      95.6       106,211 35% 8%
Forecast 2018    105.1       116,832 39% 8%
Forecast 2019    115.7       128,515 43% 8%
Forecast 2020    127.2       141,367 47% 8%
Forecast 2021    140.0       155,504 52% 8%
Forecast 2022    153.9       171,054 57% 8%
Forecast 2023    169.3       188,159 63% 8%
Forecast 2024    186.3       206,975 69% 8%
Forecast 2025    204.9       227,673 76% 8%

As you can see, you will earn a massive dividend of Rs 2.25 lakhs on a 3 lakh investment in 2025! The yield on cost in 2025 is a massive 76% ..

And this is apart from your capital appreciation – your share price has already gone up 10x times.

Conclusion

As we can see from this TCS Dividend Payment History analysis, a carefully crafted dividend investing stratgey can result in bumper yields, apart from capital appreciation. The key is to select a “good” company – one with strong management, high ROEs, low debt, growing sector and conservative capital allocation strategy.

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References

A Few Last Words

Before making any investment decision, please contact your financial adviser.

I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. I do not offer any opinion concerning securities or public offers. Whatever analysis I provide is through public media only on Mkerj. I am not covered under RA Regulations.

I have provided this article for educational purpose only.

I hope you found this article on TCS Dividend Payment History useful. If you have something to add please leave a comment in the post. Please feel free to contact me.

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

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