Vedanta Ltd. and its subsidiary Hindustan Zinc have emerged among global giants having the highest dividend yields over the last 12 months, according to a Bloomberg analysis. Despite falling profits, mining mogul Anil Agarwal’s firms stand strong with yields of 26.2% and 16.7% respectively.
Vedanta Doles Out ₹50,000 Crore in Dividends Since FY23
With a 12-month dividend yield of 26.2%, Vedanta ranks fourth globally behind top container shipping companies like Hapag-Lloyd AG, A.P. Moller – Maersk A/S and Cosco Shipping Holdings Co.
Vedanta’s payout in FY23 totalled a mammoth ₹37,758 crore, 3.6 times its full-year net profit. On Monday, it declared another ₹4,089 crore or ₹11 per share as the second interim dividend for FY24.
Overall, the mining giant has distributed ₹10,974 crore in dividends over April-September 2023, while reporting a net profit of only ₹857 crore amidst a net loss in Q2.
Since FY23, Vedanta has doled out nearly $6 billion or ₹50,000 crore in dividends to its shareholders, the highest amount by any Indian company over this period.
Hindustan Zinc Also Features Among the Top Dividend Payers
With its 12-month dividend yield at 16.7%, Vedanta’s subsidiary Hindustan Zinc grabs the eighth spot globally. Vedanta owns a 64.92% controlling stake in the zinc producer.
Topping the yields chart are Hapag-Lloyd AG at 48.4%, A.P. Moller – Maersk A/S at 36.7% and Cosco Shipping Holdings Co at 27.4%. Between them, these shipping giants have distributed $22 billion in dividends over the past year despite declining profits.
Why Are Shipping Companies Hogging the Dividend Limelight?
The container shipping sector has been flush with cash since the Covid pandemic began. Lockdowns led to rising demand for consumer goods from the Western world. But port closures and other restrictions severely hampered shipping supply chains globally.
This supply-demand mismatch allowed shipping freight rates to surge 10-20 times their regular levels! Companies like Hapag-Lloyd and Maersk reaped windfall gains as profits skyrocketed.
But with economies unlocking and demand cooling, freight rates have reverted closer to early 2020 levels. Nonetheless, cash reserves remain high enough for record capital return to shareholders.
Agarwal Diverts Vedanta Cash Flows to Manage Debt at Parent Company
Like the shipping companies, Vedanta itself has seen its profits slip after two years of commodity boom.
Yet, the generous dividends continue unabated. These could be linked to the debt situation at its UK-based parent Vedanta Resources.
Vedanta Resources faces bond repayments approaching $3.2 billion over 2023-24. It depends heavily on dividends from the Indian listed arm to service its borrowings. Hence, the urgency to upstream cash.
As of September 2023, Vedanta Ltd. had cash balances worth ₹15,702 crore, likely kept aside for future payouts.
Earlier in 2021, Vedanta Resources nearly faced insolvency as it struggled to repay bonds. Back then too, Vedanta Ltd. had to step in with a special dividend to provide temporary relief.
How Exactly Are Dividend Yields Calculated?
A company’s dividend yield is computed by adding total dividends per share paid over the trailing 12 months. This aggregate annual dividend is divided by the current market price of the share.
For instance: If a stock paid ₹2 in total dividends over the past year and now trades at ₹10. The dividend yield is ₹2/₹10 = 20%.
The formula rewards stocks that pay out a greater share of their profits. Also, yields automatically rise when share prices decline!
This explains the ultra-high yields for shipping stocks over 2022-23 as their market values eroded. Hapag Lloyd and Maersk shares have sunk 26.5% and 8.8% respectively on an yearly basis.
Similarly, Vedanta and Hindustan Zinc shares are also down 15% and 3% over the past 12 months.
Conclusion
Thanks to generous dividend payouts against falling stock prices, Vedanta Ltd. and Hindustan Zinc today boast of dividend yields at par with global giants in the shipping industry.
While Hind Zinc’s core zinc business remains robust, Vedanta continues to upstream cash to provide financial support to its debt-laden parent. Anil Agarwal will hope commodity markets look up again soon to accelerate deleveraging across the group.