India Inc pays record dividends in FY26, but payout ratio slides

In FY26, India's companies paid record dividends, amounting to a staggering ₹4.5 lakh crore. However, the payout ratio declined to a five-year low. This reduction in the proportion of profits returned to shareholders can be attributed to increased share buybacks and the need to conserve cash in a volatile geopolitical environment.

The banking and finance, information technology (IT), oil and gas, and power sectors together accounted for two-thirds of the total dividends. The sectors of banking and finance and IT contributed 21.6% of the aggregate dividends, while oil and gas, FMCG, and power sectors contributed 9.2%, 8.8%, and 5.6% respectively. The banking and finance sector saw a significant rise in its share from 15% in FY22, indicating higher profits due to improved asset quality, reduced credit costs, and expanded loan assets.

Dividends in this sector grew by 5.9% compared to double-digit growth in the previous four years, albeit slower than the sample's net profit growth of 21%. Notably, the IT sector continued to report the highest payout ratio of 75% for the second consecutive year. Meanwhile, the FMCG sector's payout ratio increased to 71% from 68% a year ago.