1:10 Stock Split: Dividend King Nestle Fixes Record Date For Shares Sub-Division

FMCG giant, Nestle has fixed the record date to determine eligible shareholders for its shares sub-division in the ratio of 1:10. The popular instant noodles Maggi maker declared its stock split on October 19th during its Q2 financial results along with a dividend payout of Rs 140 per share.

In its regulatory filing on Monday, Nestle said that the company has fixed January 5 as the record date for determining the entitlement of equity shareholders for the purpose of sub-division/ split of existing equity shares.

The stock split is in the ratio of 1:10 which means that every one existing equity share having a face value of Rs 10 each will be sub-divided into ten equity share shares having a face value of Re 1 each fully paid-up.

The company's equity shares paid-up value is at Rs 964,157,160 at a face value of Rs 10 per share.

Nestle received approval for its stock split from the shareholders in a postal ballot held on December 8.

On BSE, the stock ended at Rs 24,356.20 apiece, marginally down. The company's market cap is at Rs 2,34,832.05 crore.

In general terms, listed companies declare a stock split of already owned shares into much smaller shares. This is done to improve liquidity by breaking the shares into smaller sizes. The face value of the shares reduces in proportion to the split ratio, however, there is no impact on the company's share capital and reserves. Although the price value of a stock reduces in a stock split, the number of shares held rises in the investors' portfolio of that specific stock.

This would be the first stock split by Nestle.

Nestle is among the top ten most expensive stocks in the Indian market at present. And a stock split will make its share price cheaper and increase retail investors' participation.

Nestle follows a calendar year for reporting its financial results. That being said, the company's sales of products stood at Rs 5,009.52 crore in Q3 of the current year, compared to Rs 4,577.44 crore in Q3 of 2022. Revenue from operations was at Rs 5,036.82 crore in Q3 of 2023, as against Rs 4,658.53 crore in Q2 of 2023 and Rs 4,610.84 crore in Q3 of 2022. Net profit also surged to Rs 908.1 crore in the quarter under review, as against Rs 661.46 crore in Q3 of 2022

Last month, the company paid its second interim dividend of Rs 140 per share having a face value of Rs 10 each for the year 2023. The company's stock price turned ex-dividend on November 1st, and it had already stated that the payout would be on and from November 16th.

Earlier, in the year, Nestle paid two more dividends to the tune of Rs 27 per share and Rs 75 per share respectively.

In total, Nestle has paid dividends up to Rs 242 per share year-to-date, making it among the dividend king stocks currently. Also, the company holds a strong track record for dividend payout and has delivered up to 68 dividends since May 2001.

After Nestle's Q3 earnings, Sharekhan in its note said, "Company's strong positioning in the domestic food market, innovative product portfolio, and improving out-of-home consumption with a thrust on improving penetration in rural markets will help it drive consistent double-digit earnings growth in the long run. The company is supporting its consistent growth agenda through increased investments in capacity enhancement, strong brand support, and better R&D initiatives. The stock price continues to trade at a premium valuation of 77x and 67x its CY2023E and CY2024E earnings, respectively. In view of the limited upside from current levels, we
maintain our Hold recommendation on the stock with a revised PT of Rs. 26,805."

From the current market price, Nestle still has the potential to over a 10% upside ahead.

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