Dividends funded by debt to reduce in FY18: Ind-Ra

Firms with higher free cash flows than dividends have shifted focus from growth to higher payouts

Ratings agency India Ratings and Research or Ind-Ra has analysed the trend of companies funding dividend payouts via debt in detail and has some interesting findings. The agency expects the debt-funded dividends (DFDs) to decline going forward, after rising in recent times. “The top dividend paying corporates would pay a dividend worth Rs 90,000 crore in FY17-FY18, of which around Rs 5,800 crore will be funded by debt each year -- much lower than the average Rs 9,000 crore DFDs between FY14-FY16. The improvement is attributed to the improved profitability witnessed in FY16, which Ind-Ra expects to continue during FY17-FY18,"