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Friday, April 10, 2009

Completion silver jubilee (25 years), golden jubilee (50 years), diamond jubilee (75 years) and centenary (100 years).

Certain days and dates have special importance for investors. Such as record date for distribution of bonus and dividend. Similarly, for companies certain years have lots of significance in their corporate journey. This year many companies would be completing silver jubilee (25 years), golden jubilee (50 years), diamond jubilee (75 years) and centenary (100 years). In corporate terminology, these are called milestones. In a competitive world, crossing such milestones of existence is a big achievement that needs to be celebrated.

The big names that would be completing silver jubilees at the end of the fiscal ending March 2009 (FY 2009) include Dr. Reddy's Laboratories, GAIL (India), India Glycols, Kalindee Rail Nirman, Mercator Lines, Panacea Biotec, Radico Khaitan, Religare Enterprises, Ruchi Infrastructure, Swaraj Mazda, Titan Industries and United Phosphorus. Also, Gillette India would be completing silver jubilee at the end of June 2009. Walchandnagar Industries would finish the 100th year at the end of September 2009, while for Indian Oil Corporation and Wheels India, FY 2009 was the golden jubilee year.

Different companies celebrate these milestones in different ways. Some bring out specially designed annual reports that carry a core theme related to its achievements over the years. Another traditional way to celebrate jubilees is to pay a higher quantum of dividend to the shareholders. Few companies also tag this dividend as special dividend at the end of the year.

For instance, Tata Sponge Iron declared a higher dividend for FY 2008 to mark its silver jubilee. The company declared a dividend of 70%, which was sustainably higher compared with the 40% dividend declared in FY 2007. According to the company's annual report for FY 2008, "2007-08 was a year when silver met gold. Productivity and profitability were the highest ever in the silver jubilee year. To honor our shareholders' trust, the directors have recommended a dividend of 70%".

Companies also pay interim dividend. Interim dividend is the dividend paid between two annual general meetings.Companies such as Aarti Industries and Rico Auto Industries paid interim dividends to the shareholders in the last financial year but without attributing it to any special occasion. Aarti Industries and Rico Auto Industries celebrated their silver jubilee in FY 2008.

Investors should keep in mind that payment of high dividend depends on the cash-flow position of the company and its future business outlook. In the present situation of economic gloom in the domestic and global markets, expecting a high dividend would not be rational. However, at battered down prices, any upward revision in the rate of dividend could mean a big bounty to the shareholders as this would translate into higher dividend yield. A high dividend yield could also mean downside protection. This is because the moment the share prices dip, dividend yield goes up, and investors jump into the ring to buy the stock, thereby boosting its price.

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