Is Vedanta Set to Deliver Another Blockbuster Dividend in FY25?

Imagine receiving a consistent, growing stream of income each month without having to lift a finger. This is the allure of investing in dividend-paying stocks, often referred to as “dividend paymasters.” These companies not only generate regular income but also have the potential to increase these payouts over time, providing a reliable source of passive income. For investors, choosing the right dividend stock can be akin to discovering a money-making machine that grows your wealth while you sleep.

In today’s volatile market, one stock that continues to stand out as a reliable dividend payer is Vedanta Ltd. With a history of consistent and substantial dividend payments, Vedanta has become a favorite among income-focused investors. Recently, the company announced a hefty third interim dividend of ₹20 per share for the financial year 2024-25. This raises an intriguing question: Can Vedanta replicate its extraordinary 10,150% dividend from FY23 in the current financial year?

Vedanta’s Remarkable Dividend History

Vedanta’s dividend track record is nothing short of impressive. The company has been rewarding its shareholders with dividends for nearly three decades, dating back to 1994. Over the years, Vedanta has built a reputation for not only paying dividends consistently but also increasing them at an impressive rate.

In FY23, Vedanta made headlines by declaring a staggering 10,150% dividend, equivalent to ₹101.5 per share, on its face value of ₹1 per share. This was the largest dividend payout in the company’s history and one of the most significant by any Indian company. Investors were understandably thrilled, but the question remains: Can Vedanta maintain or exceed this level of generosity in FY25?

Dividend Performance in FY24

So far, Vedanta has announced three interim dividends for FY25, amounting to 1,100%, 400%, and 2,000% (₹11, ₹4, and ₹20 per share, respectively). While these numbers are impressive, they still fall short of the astronomical payout seen in FY23. However, with a current market price of ₹463, the dividend yield stands at a solid 6.3%.

To put this in perspective, Vedanta’s dividend payments have grown significantly over the years. The company’s first notable payout was in FY05, with a modest 20% dividend. Fast forward to FY23, and Vedanta paid a record-breaking ₹375.7 billion in dividends, the largest aggregate payout by any Indian company in a single financial year. This growth trajectory suggests that Vedanta is committed to rewarding its shareholders handsomely, but whether it can match or exceed the 10,150% dividend from FY23 remains to be seen.

Vedanta’s Financial Maneuvers and Future Prospects

It’s important to note that Vedanta’s generous dividend payouts have come at a cost. The company has raised close to ₹200 billion in recent months through various means, including dividends from its subsidiary Hindustan Zinc, selling shares of Hindustan Zinc, and selling its own shares to institutional investors. While these moves have helped fund the dividends, they also highlight the company’s need to manage its cash flow carefully.

Looking ahead, Vedanta’s future growth prospects appear promising, particularly with its ongoing restructuring plans. The company recently received approval from its lenders to demerge its business into six independent listed entities. Existing shareholders are expected to receive one share of each newly listed company for every share they currently own in Vedanta.

This restructuring, combined with Vedanta’s policy of passing on all dividends received from Hindustan Zinc to its shareholders, bodes well for future dividend payments. Hindustan Zinc, in particular, has been a significant contributor to Vedanta’s dividend payouts. In FY25, Hindustan Zinc has already paid two dividends totaling ₹29 per share, and more interim dividends are expected before the year ends.

Vedanta’s Share Price Performance in 2024

In addition to its dividends, Vedanta’s share price has also performed well in 2024. As of 3 September 2024, the stock opened at ₹473, up from its previous close of ₹463. The stock touched a 52-week high of ₹507 on 22 May 2024 and a 52-week low of ₹208 on 28 September 2023. Over the past year, Vedanta’s share price has gained 92%, with an 81% increase so far in 2024.

This strong performance, coupled with Vedanta’s consistent dividends, makes it an attractive option for investors seeking stable returns. When compared to its peers, Vedanta holds its own with a return on equity (ROE) of 21.6% and a return on capital employed (ROCE) of 25.2%. The stock’s latest earnings per share (EPS) is ₹13.3, and it has a trailing twelve-month (TTM) price-to-earnings (PE) ratio of 34.8.

The Power of Dividend Investing

Investing in dividend-paying stocks like Vedanta can be a powerful strategy for building wealth over the long term. These stocks offer two sources of return: regular income from dividend payments and capital appreciation of the stock price. When combined, these returns can compound over time, creating substantial wealth.

For investors who value stability and income, Vedanta’s track record of consistent dividend growth offers peace of mind. Even in uncertain times, companies like Vedanta, with their long histories of paying and growing dividends, can provide a reliable source of income.

In Conclusion, Vedanta’s history of dividend payments and strong share price performance make it a compelling choice for investors seeking regular income and potential capital appreciation. While it’s uncertain whether Vedanta can replicate its 10,150% dividend from FY23, the company’s commitment to rewarding its shareholders remains clear. As always, investors should keep an eye on the company’s financial health and market conditions, but for now, Vedanta appears well-positioned to continue its legacy as a dividend paymaster.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Always conduct your research or consult a financial advisor before making investment decisions.