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

ET Intelligence Group: India Inc distributed record dividends at the aggregate level in FY26 though the pay-out ratio moderated to a five-year low. This reflects a lower proportion of profits returned to shareholders via dividends amid share-buybacks and the need to conserve cash in a volatile geopolitical scenario. Companies from the sectors including banking and finance, information technology (IT), oil and gas, and power together contributed two-third to the total dividends.

For a sample of 187 companies from the BSE 200 index that have reported audited results so far, aggregate dividends touched ₹4.5 lakh crore, implying a 15% five-year annual growth rate. The sample’s aggregate dividend increased two-fold in FY26 from ₹2.2 lakh crore in FY21.

Each of the banking and finance, and IT sectors accounted for 21.6% of the aggregate dividends, followed by oil and gas, fast moving consumer goods (FMCG) and power sectors at 9.2%, 8.8% and 5.6% respectively.

The share of the banking and finance sector expanded significantly from 15% in FY22, reflecting the rising profits of the sector helped by improving asset quality, reducing credit costs and expanding loan assets. On a year-on-year basis, dividends grew by 5.9% compared with double-digit growth in the previous four years.

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It was slower than the sample’s net profit growth of 21%, implying a lower dividend payout. The pay-out ratio or dividends relative to net profit fell to 27% in FY26 from 31% in the previous year.
The IT sector continued to report the highest payout ratio of 75% for the second straight year, though it fell from 81% in the previous year. The FMCG sector followed, increasing its payout to 71% from 68% a year ago.