By Ruma Dubey

Apple was indeed the apple of everyone’s eye post its recent earnings. But more than the earnings, it was the huge pile of cash that it is sitting on popped out all eye balls.

Apple has nearly $100 billion in cash or $97.6 billion to be precise. And we wonder what will Apple do with all this cash as it neither pays a dividend nor does it go for any big, splashy acquisitions like Facebook.

On the acquisition front, the company is very conservative when it comes to its money and goes for small buyouts. And on the dividend front it has technical problem – around $64 billion of its earnings is parked out of USA and if it decides to bring it back to pay dividend, it will have to shell out 35% tax. That is the reason why other cash rich companies like Cisco, Google, Microsoft and the likes also sail in the same boat. And that is also the reason why these companies are demanding a tax holiday – urging the Govt to reduce tax on profits held abroad but the Govt does not seem to be biting this one.

But in India, we do not have such a problem. Yet, many a times, we find that cash-rich companies get stingy when it comes to paying dividend while it continues to sit on the big pile of cash, even if it burns a hole in their pockets. India Inc, undoubtedly is stingy when it comes to paying up dividend, even though they have the cash for distribution.

Take the case of Infosys itself. Had the company distributed generously, would the promoters have had to sell their holding to pursue their post retirement plans – they would have had enough cash or maybe would have had to sell only a smaller stake. Would this cash have piled up if they had been generous all along? At the end of Q3FY15, its cash and cash equivalents increased to Rs.34,873 crore ($5.65 billion) from Rs 33,616 crore ($5.44 billion) a year ago. With no acquisitions or new ventures, this cash is just sitting idle or should we say earning interest income for the company? Infosys has the largest cash pile in the IT sector, followed by TCS, which though is generous when it comes to distribution.

Others with high cash balances are GSK Consumer, GSK Pharma, Oracle Finance, Bajaj Auto, Hero Moto, NMDC, Coal India, Hind Zinc, Engineers India. In fact some 22 PSUs have the maximum cash and yet, they neither expand nor do they distribute as much as they should.

SEBI has already taken notice of this skewed hoarding attitude of India Inc and late 2014, it put forth the idea of bringing forth a dividend policy. Various sections of the media reported in Nov’14 that SEBI is considering imposing a policy for dividend distribution wherein cash rich and profitable  companies will be required to demarcate a fixed percent for dividend distribution – something where percentage of dividend distribution will be in direct proportion to th coash/profit earned.. If one looks at this from a shareholder point of view, it seems like a good idea but at the same time, such ‘curbs’ might end up affecting business decisions and many companies might even resort to ‘showing’ less profit so that they distribute less. Dividend declaration is based on the cash needs of the company and it has to be left entirely to the discretion of the management of the company. Thus imposing such restrictive laws on companies, forcing them to declare dividend commensurate with profits/cash will be detrimental and regressive.

Thus while investing its best to look for companies, among others factors, for companies which not only have a very healthy cash balance but are liberal when it comes to paying dividend to shareholders. Some of the highest and consistent dividend paying companies are : ITC, Ashok Leyland, Bajaj Auto, Cipla, M&M, Tata Steel, Tata Motors, Kanoria Chemcials, Piramal Health, Zee Entertainment, Wheels India, Elecon Eng, Madras Cement, VST Industries, ICRA, Tata Global, City Union Bank, Patni, Hero Moto, India Cements, Godavari Power, Chambal Fertiliser, TCS, GNFC and GSFC. The list is illustrious in FMCG sector too – Bosch, Nestle, HUL, Godrej Consumer and Titan. And in PSUs – ONGC, IOC, NTPC, Oil India.

High cash balance is good when supported with liberal payouts and not sitting on it, waiting for the ‘right’ time to come.