ITC Shares Gain 7% On Higher Dividend Payout Plan

Shares of ITC Ltd closed 6.77 percent on Thursday after rising as much as 7 percent to an intraday high of Rs 163.55 on NSE before paring gains.

The cigarette maker, in a statement on its website, said that "effective financial year 2019-20, in the medium term, the dividend pay-out ratio is expected to be around 80% to 85% of the PAT (Profit After Tax) of the Company."

ITC: Quotes, News

BSE 294.801.95 (-0.66%)

NSE 294.852 (-0.68%)

"The Board may declare interim dividend(s) at its discretion. The Board's recommendation to the shareholders on the final dividend may include special dividend(s) as considered appropriate," it added.

The new Dividend Distribution Policy was approved by ITC's Board on 18 March and will supersede its earlier policy adopted on 27 January 2017.

At 80-85 percent of profit, dividend per share could come to Rs 10.

Macquarie said that ITC Ltd can support a higher dividend payout ratio as it has a strong balance sheet and lower capital expenditure requirements compared to the previous financial year 2018-19. The brokerage said the company's dividend yield is now in line with global tobacco players Philip Morris International Inc., British American Tobacco Plc and Japan Tobacco Inc.

The brokerage has an 'outperform' rating on the FMCG with a price target of Rs 304, based on sum-of-parts valuations.

In the last 10 years, ITC generally hasn't been paying interim dividend but only final ones. It paid special dividend only twice - in June 2011 and May 2016.