New Delhi: To help investors identify stocks with greater return potential, regulator Sebi is mulling making it mandatory for the listed companies to adopt a 'Dividend Distribution Policy'.
Without forcing the companies to pay the dividend, the proposed policy would require them to state the circumstances under which their shareholders can or cannot expect a payout.
Besides, the policy may also require the companies to disclose a broad formula for dividend calculation, a senior official said, while adding that the proposal should not be misunderstood as Sebi forcing the companies to pay any particular amount of dividend.
The policy would largely focus on disclosures rather than being intrusive into financial decisions of the companies, he added.
Sebi's International Advisory Body has also suggested to the it that companies as a policy should not be forced to pay dividends and it is a better idea to explore mandating a Dividend Distribution Policy for corporates.
The move follows complaints from a large number of investors during Annual General Meetings that companies are not paying dividend despite sitting on huge cash piles.
Besides raising their voice on this issue before the company management and the promoters at the AGMs, various groups of investors have also written to Sebi in this regard.
There have been some cases where a few large corporates broke their years-long tradition of paying dividends during the last fiscal.
The new policy would seek to encourage the companies to pay dividends if their financials permit so, so that the investors can feel that they are also part of the concerned company's growth story.
This would also bring in a certainty among the investors that they can expect a certain portion if the company is doing well.
Globally also, investors have been raising their voice against the companies that are hoarding cash and not distributing their extra profits among the shareholders.
A number of companies in India already have a dividend distribution policy, but it is not mandatory under any regulation and therefore there is no uniformity in such policies of different corporates.
Till about a few years ago, dividend payouts used to be one of the major attractions for stock market investors, but share price appreciation has become more important now and therefore many companies have also cut down on dividends.
