As the September quarter draws to a close, the spotlight shifts to the earnings reports from India’s leading companies. The Information Technology (IT) sector, spearheaded by Tata Consultancy Services (TCS), is expected to kick off the earnings season. Given its track record of generous payouts, TCS’s shareholders are awaiting announcements about possible dividends, share buybacks, or bonus issues.

Dividend History

Since it began rewarding shareholders in 2007, TCS has developed a reputation for being one of the most shareholder-friendly companies in the Indian stock market. Over its history as a publicly traded entity, TCS has paid a cumulative dividend of Rs 742 per share to its investors.

In the first quarter of the current financial year, TCS declared an interim dividend of Rs 10 per share. This payout followed a special dividend of Rs 28 per share announced at the end of FY24, coupled with a final dividend of Rs 18. Collectively, this brought the total dividend payout to an impressive Rs 46 per share for the fiscal year.

The highest single dividend payout from TCS came at the beginning of 2023, when the company declared a special dividend of Rs 67 per share, in addition to an interim dividend of Rs 8, resulting in a total payout of Rs 75 per share. Such substantial payouts highlight TCS’s financial strength and its willingness to share its profits with investors, even in times of global economic uncertainty.

Share Buybacks

The company has also conducted multiple share buybacks over the years. These buybacks are viewed as a means to return excess capital to shareholders while reducing the number of shares outstanding, effectively increasing the value of remaining shares.

The first share buyback was executed in 2017, with TCS repurchasing shares at Rs 2,850 each, in a deal valued at Rs 16,000 crore. A year later, the company repurchased shares at a price of Rs 2,100 apiece. The surge in IT stocks during the COVID-19 pandemic in 2020 led TCS to announce another buyback, this time at Rs 3,000 per share. By 2022, TCS executed another buyback at an even higher price of Rs 4,500 per share.

Interestingly, TCS’s shares crossed the Rs 4,500 mark in August 2024, reaching a high of Rs 4,592. However, following a period of underperformance over the next 12 months, the company announced a share buyback in October 2023 at a slightly lower price of Rs 4,150 per share.

Bonus Shares

Apart from dividends and buybacks, TCS has also rewarded its shareholders with bonus shares on two occasions. The first bonus issue was in 2009, where investors received one free share for every share held. TCS replicated this 1:1 bonus share issuance in 2018.

As the market awaits TCS’s announcement of its September quarter results, all eyes are on whether the company will consider another interim dividend or perhaps a fresh share buyback. This speculation is fueled by changes in the buyback tax laws introduced in the recent Union Budget, which could influence TCS’s strategy regarding capital allocation.

While TCS has not yet announced the exact date for its September quarter results, market analysts expect the company to maintain its trend of strong financial performance. The IT giant’s consistent profitability and growth make it a favourite among long-term investors, and any announcement of additional rewards could further boost investor sentiment.

TCS Stock Performance

TCS has a history of delivering strong returns to its investors over the years. Despite experiencing negative returns in only three out of the last 10 calendar years (2015, 2016, and 2022), the stock has managed to deliver an average annual return of 14.5% over the past decade.

In 2020 and 2021, during the pandemic-induced surge in IT sector stocks, TCS shares gained over 30% in both years. Even in 2024, TCS has managed to stay ahead, with its stock gaining 12.7% so far, despite a 6% dip in September.

Story first published: Saturday, September 28, 2024, 13:45 [IST]