Time To Look At Dividend Payouts

There’s a new deluge of dividends pouring in and investors may well hold on to the companies making them. More than 200 companies have announced interim dividends even as companies that don’t announce such dividends are rushing to make the payouts before this 2016 financial year ends. And these payouts are going to reflect in your bank account on or before 31st March, perking up your cash flows.

Now chances of a fat final dividend payout have diminished. Final dividends are usually paid in the second quarter of a financial year which is the time when investors scout for dividend yield companies.

For those who do, now’s the time to look at dividend paying companies. Because in or around the month of September 2016, the dividend yields may look good on paper, but a bulk of the payouts would have already been done in March.

Stocks are more than likely to stay mildly bullish in the coming few weeks as the dividend record dates are set and even as the ECB announced further stimulus measures. The BSE Sensex eeked out modest uptick last week gaining 0.45 per cent, and this upwardly meandering market may be the sentiment of the moment.

The good news that continues on the international front is that foreign investors are loading up on Indian stocks purchasing shares worth Rs 1780 last week. This marks two consecutive weeks of cash-buying by foreign investors in a trend that started immediately after Budget 2016.

European Central Bank’s announcement that it will increase the bond buying program further should keep more cash flowing into asset markets in Europe and perhaps across the world. The ECB announced further stimulus measures cutting interest rates on deposits to -0.4 per cent, and main refinance rate to 0.0 per cent. The ECB also expanded its bond buying program to 80 billion euros from the current 60 billion euros.

The second major announcement is from the China’s central bank which said it is not going to provide additional stimulus but the bank is keeping options open in case there is a shock in the domestic or global markets. The Chinese central bank has reduced interest rates six times in the last 15 months to stimulate the economy. Last week, the bank cut the reserve requirement ratio lenders have to hold in a bid to increase lending in the economy. The thing to watch for is a devaluation of the yuan.

If the upbeat mood in the international market continues, the Indian markets may overlook the negative economic news coming in last week that the Index of Industrial Production has dipped to -1.5 percent. The economic recovery is happening much too slowly.

Another crucial development to watch out for in the coming weeks that could keep the bears busy is the payment of advance tax numbers. The market takes cues from these numbers to crudely assess the profitability for the full year.

The bulls could begin to get worried if companies put up a poor show of fourth quarter results. The economy is lumbering along, order intakes are slow, PSU banks are going through a balance sheet clean-up. All this will weigh on the markets in the coming weeks.

Probably the biggest worry for the market and the bulls in the coming weeks could come from the weather bureau. After two consecutive years of lacklustre monsoons, the economy may not be able to afford another low monsoon year on which the rural economy is heavily dependent on.

But this is still early days. In the days to come, the announcement of big off-season dividends should see millions of shareholders - and the markets - in a cheerful mood.