How ITC's new capital allocation plan could revive investor sentiment

Higher dividend payout addresses key concern of lower return on capital employed

The stock of ITC surged 7.5 per cent to close at Rs 161.95 on Tuesday, even as bears continued to dominate the markets, with the BSE Sensex slipping 2 per cent. The company’s new capital allocation policy was the key reason for the improvement in investor sentiment. Since almost a year now, the stock has been off investors’ radar because of concerns over cigarette volume growth and profitability of other businesses.

According to ITC’s new dividend distribution policy, announced on Wednesday and to remain in force over the medium-term, the company would pay 80-85 per cent of its profit after tax