et intelligence group bajaj autos decision to increase the dividend payout ratio will result in a more efficient capital allocation thereby improving the return on equity roe this is expected to improve the stocks valuation multiple in the near term it gained 25 despite over 1 fall in the benchmark indices on thursday the countrys largest twowheeler maker by market capitalisation stated on thursday that it can declare a dividend up to 90 of the standalone profit if the surplus cash is higher than rs 15000 crore in case the cash surplus is between rs 7500 crore and rs 15000 crore the extent of dividend will be 7090 of the profit in the past the companys dividend payout at 5060 has been one of the highest in the automobile sector according to the capitaline data the companys cash and equivalents were rs 16240 crore at the end of dec 2020 analysts expect a net profit of rs 42004600 crore for the current fiscal year this implies a possible dividend of rs 131143 per share considering the revised dividend policy which is 6070 per cent higher than the estimated range of dividend for the year it also implies a dividend yield of 4 per cent which may attract longterm investors interested in highyield stocks with sound fundamentals lic norways pension fund and sbietf fund are some of the largest institutional investors in the company as per companys fy20 annual report advt lack of major capital expenditure plans in the next few years improves dividend visibility in addition despite the companys project of electric vehicles and high performance bikes which would cost rs 650 crore it would still be able to generate free cash flow of more than rs 4000 crore a year higher dividend will reduce cash on books thereby boosting the roe by 300350 basis points compared with the consensus roe estimate of 2324 per cent for the next fiscal yeara higher share of the exports in the total volume would support earnings growth for the next fiscal year the tentative production volume suggests an encouraging scenario for the companys export volume which may reach closer to the fy20 level the total export volume of twowheelers may surpass its domestic sales for the current and next fiscal year the pressure on the margins due to surging raw material cost is relatively less given the rising share of highpriced bikes this is likely to result in over 20 earnings growth for fy22at thursdays closing price of rs 36635 the stock was traded at 19 times the oneyear forward earnings it is 7 per cent higher than the longterm average by ashutosh r shyam et bureau published on mar 19 2021 at 0111 pm ist telegram facebook copy link be the first one to comment comment now comments comment now read comment 1 all comments post post find this comment offensive choose your reason below and click on the submit button this will alert our moderators to take actions reasons for