Indian companies handed higher aggregate dividends in 2025-26, but the growth in payouts slowed as boards retained a larger share of earnings amid uncertainty over business conditions and investment plans fuelled by the war in West Asia.
A Mint analysis of BSE 500 companies, based on unaudited results and including proposed dividends, showed that aggregate payouts rose 8.2% year-on-year to ₹5.13 trillion in FY26, slowing from an 11.9% increase in FY25, when payouts stood at ₹4.74 trillion.
Predictably, cash-rich companies such as Tata Consultancy Services Ltd, ITC Ltd, and Coal India Ltd led shareholder payouts among India’s 500 largest listed firms.
The dividend payout ratio—the proportion of earnings distributed to shareholders—fell to 27.6%, its lowest level in 12 years, from 30.4% in FY25, suggesting that dividend growth is being driven by a narrow group of cash-rich companies.
Payout restraint
“FY26’s moderation in dividend growth partly reflects the absence of special payouts seen in FY25 and a conservative reset in per-share dividend policies amid uncertain earnings visibility,” said Tanvi Kanchan, associate director at Anand Rathi Shares & Stock Brokers.
FY27 payouts, she said, will likely depend on three factors: whether the recent profit decline was concentrated in a few cyclical sectors such as commodities, oil marketing and metals, and whether that base normalizes; whether capex intentions stabilise or continue to soften, given NSO (National Statistics Office) data from its forward-looking survey of private corporate investment already shows planned FY27 capex down 16.5% from FY26; and whether easing interest rates and global trade uncertainty lift corporate confidence enough to unwind the current caution.
She also pointed to buybacks as a substitute, where several large-cap companies now prefer them over dividends for tax and confidence-signaling reasons. “So, a low payout ratio doesn't always mean lower total shareholder returns,” she added.
Buyback activity has picked up sharply in 2026. As of 24 July, companies have announced offers worth ₹24,950.69 crore, the highest since 2023 and already exceeding the 14 issues worth ₹19,711.71 crore recorded in 2025, according to primedatabase.com.
The payout ratio has broadly trended lower in recent years. It declined from 36.5% in FY23 to 30% in FY24, edged up to 30.4% in FY25 and then dropped to 27.6% in FY26. The latest reading is substantially below the 12-year average of around 35.5%.
Rajesh Singla, chief executive and fund manager at Alpha AMC, described the decline in the payout ratio as a sign of capital discipline rather than corporate distress.
“The lower payout ratio does not necessarily signal excessive caution, as companies may be retaining earnings for capital expenditure, deleveraging and acquisitions even as planned capex moderates,” Singla said. “The outlook for FY27 payouts will depend on how the investment cycle evolves and whether companies begin generating returns on the capital already deployed.”
Even as companies show limited appetite for fresh investments, the growth of their cash piles has moderated slightly. Non-financial firms in the sample saw cash reserves grow by roughly 13% in FY26, down from nearly 15% in the previous fiscal.
Moreover, dividend growth and payout ratios have not always moved in tandem. In FY19, dividends declined 6.3% and the payout ratio fell to 34.9% from 40.4% in FY18. In FY20, dividend growth recovered to 6.3%, while the ratio surged to 50.9%.
Dividend growth accelerated to 35.6% in FY21 even as the payout ratio eased to 40%. Growth remained around 24% in FY22 and FY23, while the ratio first fell to 32.2% and then recovered to 36.5%.
More recently, dividend growth moderated to 9.6% in FY24, improved to 11.9% in FY25 and slowed again to 8.2% in FY26. The payout ratio, meanwhile, fell from 30% in FY24 to 27.6%.
Top guns dominate
Dividend payouts remained concentrated among a small group of cash-rich companies, with the six biggest payers accounting for more than a quarter of the total.
Tata Consultancy Services led the pack with a payout of ₹39,820 crore in FY26. HDFC Bank followed with ₹23,860 crore, while Infosys distributed ₹19,459 crore and ITC paid ₹18,168 crore. Oil and Natural Gas Corp. and Coal India paid ₹16,669 crore and ₹16,485 crore, respectively.
Together, these six companies distributed about ₹1.34 trillion, or roughly 26% of the aggregate dividends paid by the BSE 500 companies. TCS alone accounted for nearly 8% of the total.
“Concentration at the top of India's dividend league table isn't new, it's been true for over a decade that a handful of high free-cash-flow, capital-light businesses (large IT services companies, PSU energy and mining majors, and a few large private banks and NBFCs) account for a disproportionate share of aggregate payouts. TCS alone has topped this table for years precisely because IT services generate cash without heavy reinvestment needs, and has a formal capital allocation policy built around returning most of its free cash flow. So, the concentration itself, in isolation, isn't a red flag, it reflects which business models structurally throw off surplus cash,” said Kanchan.
“Rising concentration alongside a 12-year-low payout ratio suggests dividend growth is being driven by a narrow group of cash-rich companies, while the broader market is pulling back. This points to weakening breadth, even if the top payers remain financially healthy,” she added.
Singla said the numbers showed that India’s dividend story remained relatively narrow. “IT majors and large financial companies have strong cash generation and comparatively low reinvestment requirements, making them natural dividend payers. That is structural rather than cyclical,” he said.