DIVIDEND POLICY
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DIVIDEND
 Refers to the corporate net profits distributed among shareholders
 The dividend decision involves the division of profits of the firms into dividend and retained earnings
 There are two dividend policy theories
• Relevant(which consider dividend decision relevant)
Walter’s Model
Gordon’s Model
• Irrelevant (which consider dividend decision irrelevant) Modigilani and Miller approach
DIVIDEND POLICY
Management views ITC’s dividend as an important component of its total shareholder return proposition
Since its initial public offering, ITC has grown its dividend by approximately 5% per year on average
On August 18, 2009 ITC’s board of directors declared a quarterly dividend of $0.32 per share payable on September 15, 2009 to shareholders of record on September 1, 2009 representing a 4.9% increase over the prior level
Near-term dividend policy
—Continue to balance rewarding shareholders and funding long-term growth prospects
—Maintain dividend yield that keeps pace with the S&P 500 (approximately 3%)
—Consistently grow our dividend at a level that more than compensates for inflation
—Target a payout ratio between 40-50%
Our expectation is that we will continue to grow the dividend 4-5% annually in the next few years, but payout ratio will decline as EPS growth expected to significantly outpace dividend growth
ITC had declared a dividend of Rs. 4.50 per share for the year ended March 2010 and also a special centenary dividend Rs.5.50 per share.
ITC's board will meet on 18 June 2010 to consider issue of bonus shares. The company had last issued bonus shares in the ratio of 1:2 in 2005.
ITC's net profit rose 27.10% to Rs. 1028.22 crore on 27.90% increase in net sales to Rs. 5053.79 crore in Q4 March 2010 over Q4 March 2009.
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