Can Investors Expect a 10,000% Dividend from Vedanta?

Imagine that you're able to generate a growing source of income every single month.

Month after month... steady payouts rolling into your bank account...

And the best part? You don't need to do anything.

That's the power of dividend paymasters.

A good dividend paymaster will:

• Generate regular income
• Grow the income over time
• Run for a long time without a lot of maintenance

I always advice my friends that each company they invest in should pay regular dividends and that should be considered as a part of their monthly income.

Because ultimately, all these companies will work together to keep the passive income running and deliver consistent payouts.

All you have to do then is watch your wealth grow as the power of compounding plays its role...

Imagine putting money into a machine and getting back a little more every single time.

If you keep reinvesting what you earn, your machine will eventually produce a lot more for you while you can have a good night's sleep.

So, which stock would you pick as your go-to dividend option in the current market situation?

I'm pretty sure that just like any wise investor, you too would choose to invest your hard-earned money in a large-cap stock with a track record of paying enormous dividends consistently.

A not-so surprising stock which has rewarded investors handsomely over the years and also fits into the criteria of decent growth, steady payouts, strong future growth prospects is none other than Vedanta.

The company recently announced a hefty payout of Rs 20 per share as its third interim dividend for financial year 2024-25.

If you look at the company's track record of dividends, it has never disappointed investors for the past three decades.

That's right. Vedanta has been paying dividends since 1994 at a growing rate.

The company shattered all records in FY23 when it paid a 10,150% dividend on its face value, amounting to Rs 101.5 per share.

So the question is can the company repeat this astronomical feat once again and pay a 10,000% dividend or more in FY25?

It has already declared/paid three dividends amounting to 1,100%, 400% and 2,000% (Rs 11, Rs 4 and Rs 20 in rupee terms) for FY25.

Vedanta Ltd.

Vedanta is the sole producer of Nickel in India. The company achieved this feat with the successful acquisition of a nickel and cobalt plant at Goa.

Over the past two decades, the company has rewarded its investors with over Rs 970 bn through dividends alone... take a moment to process this!

Let us take a look at Vedanta's dividend history for the last 20 years.

Year End	Dividend %	Dividend Yield %	Dividend per Share(Rs)	Face Value(Rs)
31-Mar-2024	2,950	10.9	29.5	1.0
31-Mar-2023	10,150	37.0	101.5	1.0
31-Mar-2022	4,500	11.2	45.0	1.0
31-Mar-2021	950	4.2	9.5	1.0
31-Mar-2020	390	6.0	3.9	1.0
31-Mar-2019	1,885	10.3	18.9	1.0
31-Mar-2018	2,120	7.6	21.2	1.0
31-Mar-2017	1,945	7.1	19.5	1.0
31-Mar-2016	350	3.9	3.5	1.0
31-Mar-2015	410	2.2	4.1	1.0
31-Mar-2014	325	1.7	3.3	1.0
31-Mar-2013	10	0.1	0.1	1.0
31-Mar-2012	400	2.1	4.0	1.0
31-Mar-2011	350	1.2	3.5	1.0
31-Mar-2010	325	0.7	3.3	1.0
31-Mar-2009	225	2.2	2.3	1.0
31-Mar-2008	450	1.4	45.0	10.0
31-Mar-2007	400	2.4	40.0	10.0
31-Mar-2006	400	3.1	40.0	10.0
31-Mar-2005	225	3.1	22.5	10.0
31-Mar-2004	100	2.1	10.0	10.0

Data Source: Ace Equity

Starting with a modest dividend payout of just 20% in financial year 2005, the company has increased the dividends exponentially to as high as 357% in FY23 and 259% in FY24.

In FY23, the company made history by making the largest aggregate dividend payout by any Indian company in a single financial year of Rs 375.7 billion (bn).

On the date of writing this article, the company has announced another massive dividend of Rs 20 per share i.e. 2,000% on face value of Rs 1 per share for the financial year 2024-25 amounting to Rs 78.2 bn.

At the current market price of Rs 463, the dividend yield is 6.3%.

The record date for the purpose of payment of this interim dividend is 10 September 2024.

With this, Vedanta has now paid Rs 35 per share as dividend to shareholders so far in the current financial year.

These dividends may have come at a cost as according to reports, Vedanta has raised close to Rs 200 bn through various methods in recent months, including dividends from its subsidiary Hindustan Zinc, selling shares of Hindustan Zinc and by selling its own shares to institutional shareholders.

Over the years, it's not just with dividends the company has rewarded its shareholders.

The stock price has seen periods of troughs and booms in the past decade. A 10-year period starting from September 2014 till date shows that Vedanta has given a CAGR of 5.3% to its shareholders.

For an investor looking for stable returns by investing in strong and large companies in the market, 8% to 10% is ideally considered a reasonably good CAGR over the long term.

Vedanta's Future Growth Prospects

The stock of Vedanta has remained the hot topic among Dalal Street investors, ever since it announced restructuring plans and the demerger of its businesses.

The company's lenders recently approved the proposed demerger of the business into six independent listed companies.

Existing shareholders are expected to receive one share each of the newly listed entities for every share they already own in Vedanta.

We wrote more about these entities here.

Post demerger, Vedanta would hold the 64.92% stake it already has in its subsidiary Hindustan Zinc and the stainless-steel manufacturing business.

It will also hold the upcoming semiconductor and display business.

By splitting into six independent entities, Vedanta aims to streamline its operations and unlock greater value for shareholders.

This restructuring is expected to simplify the group's complex structure, making it easier for investors to directly access pure-play opportunities and potentially drive multiple expansions over the long term.

Moreover, the new structure could play a crucial role in addressing Vedanta's substantial debt burden. The company still has significant financial obligations even though it has plans to reduce debt soon. According to media reports, Vedanta's gross debt excluding leases stood at Rs 780 bn as of the first quarter of FY25.

By creating separate entities, Vedanta may be better positioned to manage and reduce its debt.

Being the largest aluminium player in the country, Vedanta is investing heavily in expanding its aluminium capacity and taking advantage of the growing demand for aluminium products.

The company's peer - Hindalco's MD recently said that the demand for aluminium & copper remains strong.

Vedanta is also ensuring that its profitability is increased by acquiring coal mines for backward integration. The company has plans to invest Rs 420 bn in capex in the next year to increase backward integration and ramp-up capacities in aluminium.

Apart from that, Vedanta is concentrating on diversifying its product portfolio and revenue streams by expanding its operations in iron, oil and gas, and power segments.

Given the growing demand for aluminium across various industries such as automobile, infrastructure, railways, and construction, the capex investments by Vedanta couldn't have come at a better time.

Apart from that, media reports also state that the company is speculated to enter the lithium mining sector. Vedanta is planning to explore lithium mining opportunities in Zambia and the Democratic Republic of the Congo (DRC).

Furthermore, Vedanta has expressed interest in surveying and excavating the lithium mine discovered in Chhattisgarh's Korba district, alongside other companies such as Adani Enterprises.

As far as future dividends are concerned, Vedanta's policy mandates passing on all dividends received from its subsidiary, Hindustan Zinc to its shareholders. This approach has over the years rewarded shareholders and also assisted Vedanta Resources in servicing its debt obligations.

So far in FY25, Hindustan Zinc has paid two dividends amounting to Rs 10 per share and Rs 19 per share. In FY23, Hindustan Zinc had made a record dividend payout, following up with a Rs 54.9 bn payout in FY24.

The company is expected to pay more interim dividends for the remainder of the year, and Vedanta would be receiving a huge chunk of it.

For more information, check out Vedanta's dividend history and Hindustan Zinc's dividend history.

How Vedanta Share Price has Performed in 2024

Vedanta share price opened the day at Rs 473 on 3 September 2024 against its previous close of Rs 463.

Vedanta touched its 52-week high of Rs 507 on 22 May 2024 and a 52-week low of Rs 208 on 28 September 2023.

In the past 1 year, it has gained 92%. In 2024 so far, Vedanta share price is up 81%.

Here's a table comparing Vedanta with its peers -

Comparative Analysis

Company	Vedanta	Gravita India	Hindalco	Ram Ratna Wires	Hindustan Zinc
ROE (%)	21.6	33.9	11.1	15.1	55.2
ROCE (%)	25.2	28.2	10.1	18.9	45.9
Latest EPS (Rs)	13.3	36.9	47.9	12.9	19.3
TTM PE (x)	34.8	60.3	14.3	46.9	25.6
TTM Price to book (x)	4.1	16.9	1.4	6.2	11.9
Dividend yield (%)	6.4	0.0	0.5	0.8	2.6
Industry PE	34.8
Industry PB	4.1

Data Source: Ace Equity, Equitymaster

In Conclusion

Investing in the highest and most consistent dividend paying stocks can be a great investment strategy as dividend stocks provide two sources of return: regular income from dividend payments and capital appreciation of the stock price.

This total return can add up to create substantial wealth over time.

The next time you have any doubts about compounding or are concerned about how dividends can grow over time, just bookmark this editorial and look at this chart -

Just as we saw with Vedanta, if you stick around over the long term, a tiny 1% yield in 2004 can gradually increase to the current yield of 6%+ or more.

One of the best things about dividend paymasters like Vedanta is these companies have long histories of annual dividend growth. This offers peace of mind to investors in uncertain times.

That's it for today.

Happy Dividend Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...