Hi Everyone! Today there is some exciting piece of news coming from Hero Honda regarding the dividend payment. As many of you might be aware that Hero Honda has very good reputation especially with its shareholders because the company pays handsome amount of money as dividends. The company further made it clear that their high dividends will continue in future too as they have excess cash reserves to fund dividend payments.
On the contrary, if one looks from another view point then one may probably understand that promoters are indeed pocketing handsome amount by declaring these high dividends. The company rolled out 5250% dividend last fiscal and it will continue to do so despite its massive expansion plans. Mr. Ravi Sud (CFO, Hero Honda) said that the company generates Rs.2000 crores of cash reserves every year which is enough to maintain their liberal dividend policy. He was further of the opinion that the company has decided to continue with its policy of high dividends as the two wheeler industry is not very capital intensive. This statement will significantly increase the market value of the company. Last month or so the company rolled out 3500% of dividends followed by 1750% of additional dividend which made their market share price increase.
The Munjal family, promoters and the shareholders got a treat last fiscal as well as this fiscal by the company’s dividend payout policy. Only in this financial year the Munjal family holding more than 50% stake pocketed Rs. 700 crore through the first dividend and Rs.350 Crore through the final dividend. All in all, the company is not in a mood to stop these dividends flowing which is indeed good for the shareholders and the rest of the group. If these dividends continue at the same pace then Hero Honda might be the first choice for any investor to invest in automobile sector.