TCS and Infosys among other top global cos with higher dividend than capex

Tata Consultancy Services (TCS) and Infosys are way ahead in the game of global growth. The two Indian IT firms are among the top 50 companies from around the world that are highly profitable, capex-light and returning more money to shareholders than they are using for themselves.

A spokesperson for TCS, which paid about $2.5 billion as dividend to its shareholders between April 2014 and March 2015, told TOI that the company has been consistent in its payouts, paying dividend in each quarter since its IPO in 2004. It also said that historically, the dividend payout excluding special dividends has ranged between 25% and 40% but it declined to comment if it could be maintained.

"Efficient working capital management, industry leading margins and annual growth have contributed to higher cash conversion. The cash generated from operations has been very healthy for TCS and after taking into considerations the investment needs of the company in terms of capital expenditure and strategic investments, the board of directors recommend the dividend taking into account the dividend policy," the company said.

During fiscal 2015, Infosys paid nearly $900 million as dividend to its shareholders.

Equity investors globally prefer capital distribution over capital investment, and hence markets and sectors that favour payouts are being rewarded with outperformance and higher valuations. Citi analysts screened highly profitable companies that are returning more capital to shareholders than they are reinvesting in their business. Apple, the most valuable company in the world with a $750-billion market capitalization, topped the 2014 chart with a dividend payout of $56 billion to its shareholders.


The message to CEOs of large companies is that if a company wants a higher price-to-earnings multiple and a rising share price, then pay out more and invest less. "Right now, the market seems to want Cash Cows, not capex compulsives," the report noted.
TCS and Infosys have been listed along with global brands like Apple, Oracle, Coke and McDonald's in Citigroup's World's Biggest Cash Cow list. US companies dominate the league table which was carved out from a global pool of about 2,400 companies with market capitalization of at least $10 billion (around Rs 64,000 crore at current exchange rate). India has two representatives on the list while Brazil and Russia have one each, but China has none.

(image credits: Indiatimes)