Dividend - A misguiding return

Hello,

Have we ever invested in equity markets expecting a dividend ? I do not think so. Dividends that are offered by various companies are totally misguiding. I say this because though a company declares a 100% dividend the actual return that one gets on his investment is substantially awfully low.

Let me justify my point with an example: I hold 50 shares of a company bought at Rs.500 from the open market that currently trades around Rs. 500. Face value of share is Re. 1/- Company declares a dividend of 100%.

Invested Amount : Rs. 25000/-
Dividend Received: Rs. 50/-
Return on Investment from Dividend : 0.2%

You can imagine the low returns that one might get if the share price of company is above Rs.500.

Hence I conclude that all that an equity investor is interested into is the capital appreciation and not the return that he might get as part of dividend. It hardly makes any difference to the pocket of shareholder if the company declares 100% dividend or 200%. This is some serious flaw that I need to highlight.

What can be done ???
Firstly the basis of giving return needs to be corrected. The company provides dividend based on the face value of the share. According to me, if the company has raised the money, the return should be distributed on that amount. If the share has raised the money at Rs.200 from the market during its IPO then the return should be offered on this Rs.200/- rather than on Re 1/-(face value). If there have been multiple follow-on public offers then the return should be provided on weighted average of the offer prices.

Benefits:
1. Shareholders will value the dividend as a substantial part of the return and would like to hold the share not only for capital appreciation but also for dividend announcement.
2. This will in-effect reduce the volatility from the market and also provide some stability
3. It will give a meaningful value to the dividend value (100% is really 100%)

According to me if dividends are distributed the way they are now, they are just a waste outflow of money for the companies as it makes no difference to the shareholders whether they declare 100% or 500% dividend. Hence, either the companies should end the era of giving dividends or change the way they give dividends.

Deadlines are really dead-lines ???

It has been seen that deadlines set for various new progressive launches in India are just declared for declaring sake. Here are few major examples for the same:

1. GST (Goods and Service Tax)
This system first declared that GST will be launched by Apr 2010, but as we can see this deadline does not seem to be fulfilled.

2. 3G spectrum allocation
Every three months a new deadline is set, and this time it was a shock to see that a decision might be made for a mock spectrum allocation. There is no clarity about the obstacles with respect to spectrum conflict with the defence ministry.

3. NSE/BSE to extend the timings
A hurried decision on extending the timings and showing the desperation to show some changes will be the right words. No clear path/execution motive/consent of various stakeholders was taken and timings of 09:45 AM/ 09:00 AM / (09:00 AM- 05:00 PM) kept floating and keeping the investors/employees of the exchanges guessing their fate.

4. Number portability
Another one, government passes a deadline that all the operators have to be prepared to go live with number portability by Dec 31,2009. This deadline was declared neither having any consent of the major operators nor about the time-frame for technological adjustments. Result: MTNL the PSU in the telecom industry declares that it will not be ready for number portability. Hence the deadline is now extended by three months.

Seeing all this are any deadlines declared to be trusted ??? I leave this decision to you.

E-waste

Friends,
Came across a nice article referring to E-waste. E-waste in simple terms means all the discarded electronic gadgets, chips, machines etc. Already earth is getting affected by global warming, this new phenomenon is causing a huge damage to India specifically than the rest of the world. Here is answer to your questions how and why ?

How : As we all know that waste management in India is really bad, and there is no organised sector taking care of such a waste. India being a developing economy, uses a lot of electronic gadgets, also with the pace of advancement of technology, the electronic gadgets, appliances and machines are becoming obsolete really fast. This is causing a lot of electronic waste. Well, this should be same for any country, but not, India is said to be one of the dumping hub for electronic items for many developed countries. One of the major reasons for this is, to re-cycle this waste in a country like US a $20 is spent whereas in India the same is done in $2. Well, aren't we the "Mecca of Outsourcing", we have even started "Waste Outsourcing".

Why : The Damage: It is said that E-waste poses serious health hazards. Materials like lead found in circuit boards and monitors damage the nervous system, while Cadmium from chip resistors can induce cancer. Once these hazardous materials percolate the environment and contaminate the soil, water and air we are headed for a disaster.

What can we do : There are special organisations that take care of E-waste like Ecoreco (Eco Recycling Limited), these organisations re-cycle thewaste in a manner that the hazardous materials do not affect the environment. We can even hand over the E-waste to these organizations by contacting them.

Save the environment....Save your future......

Course on Corporate finance

Course on Corporate Finance by IIM Calcultta and Macmillan India Collaboration

The objective of the course is to apprise the participant of the three major aspects of finance, namely, the theories of Corporate finance, the analytical techniques and the financial markets. The course aims at helping participants to gain proficiency in applying the theories in actual practice.

Course Overview :-

• An overview of the Finance Function and the basic concepts of Financial Analysis and Time Value of money
  
  Risk and Return, Cost of Capital and Capital Structure decision
  
  Capital Budgeting decision and Dividend Policy
  
  Long-term Capital Financing and Working Capital Management
  Eligibility
  
  Managers/executives working in corporate finance departments of companies across different industrial sectors (graduates in any discipline)
  -
  Executives/professionals/unemployed with graduation degree in finance or commerce having the required background knowledge and skills and who desire to understand concepts in Corporate Finance in order to broaden their knowledge base
  -
  CA/CS and other financial consultants who desire to understand the concepts of Corporate Finance
  -
  The important criteria even for unemployed or students undergoing Master's courses is the ability to understand the subject matter in the time frame of the course so that they could benefit from this course.