Reference no: EM132579702
Infosys became a public limited company under the name of Infosys Technologies Limited in June 1992. Infosys is a debt-free company as it generates sufficient cash to finance all its operational and investing requirements. The company has grown exponentially since its inception, and has happily shared its success with its investors by adopting a continuously growing dividend policy. The dividend payout trend at Infosys was around 10 per cent to 14 per cent of its net profits till 1999. In 2000, the company declared an interim dividend of INR 2.50 per share of par value of INR 5 each, (50 per cent of the face value). In 2001, it declared a record interim dividend of INR 7.50 per share (150 per cent). In 2004, the company created history by making a record dividend payout of 2,590 per cent to its shareholders. This included a special one-time dividend of 2,000 per cent and a regular dividend of 590 per cent. This was the single biggest dividend payout by any Indian private enterprise. The special dividend of 2,000 per cent was a one-time payment as the company crossed the USD1billion mark in revenues. Besides the cash dividend, the company also paid a bonus of 3:1 stock. In 2005, Infosys declared a final dividend of INR 6.50 per share (130 per cent). Along with the interim dividend of INR 5 per share (100 per cent), the total dividend for the financial year 2005 amounted to INR 11.50 (230 per cent), amounting to a total distribution of INR 3.098 billion. The company crossed the USD 2 billion revenue mark in 2006, and it rewarded its shareholders with a 1:1 bonus and a special silver-jubi-lee dividend of INR 30 per share, which amounts to 600 per cent on a par value of INR 5 each. In 2007, it declared a dividend of INR 6.5 per share (130 per cent on a par value of INR 5 per share). An interim dividend of INR 5 per share (100 per cent) was also distributed. The total dividend inclusive of dividend tax was 19.9 per cent, compared to 19.4 per cent in the previous year (2006). For the financial year 2008, the Board of directors recommended a final dividend of INR 7.25 per share, amounting to INR 4.15 billion. The company's board also recommended a special dividend of INR 20 per share, amounting to INR 11.44 billion. Including the interim divi-dend of INR 6 per share, amounting to INR 3.43 billion, the total dividend recommended for the year comes to INR 33.25 per share, amounting to INR 19.02 billion. Besides cash dividends, Infosys has also been distributing bonus shares as dividends in kind. Bonus dividends distributed over the years was 1:1 in 2006, 3: I in 2004, 1:1 in 1999, 1:1 in 1997 and 1:1 in 1994. Infosys is an example of a company that has increased its dividend payments with growth in its earnings. It is evi-dent from its dividend policy that its dividend payouts are linked to its financial performance. The company has been paying dividends continuously since 1994, and its shareholders have been adequately compensated with increasing dividends and regular bonus issues.
Q.1 In the context of above article, discusses the dividend policy of Info sys Technologies Limited?
Q.2 "The dividend policy adopted by Infosys Technologies Limited is bad in the long run for the business" critically evaluate the statement.
Please elaborate answer in detail.