Rs 20/Share Dividend, 7.94% Yield: Largecap Metal Stock Vedanta Slumps As It Trades Ex-Dividend; BUY?

Vedanta Ltd shares turned ex-dividend, trading lower after the announcement of the third interim dividend for the financial year 2024-25. The stock opened at Rs 439.80 on the National Stock Exchange (NSE) and was trading close to that level throughout Tuesday's session, marking a dip from its previous close of Rs 460.25. As of 10:10 am, Vedanta shares were down by over 4%, trading at Rs 440.25.

On September 2, 2024, Vedanta's Board of Directors approved a third interim dividend of Rs 20 per equity share, on a face value of Rs 1 per share, for FY25. This payout amounts to Rs 7,821 crore. According to the company's official release, the record date for this dividend payment is set for Tuesday, September 10, 2024. Investors who held Vedanta shares before this date are eligible to receive the dividend, which is one of the primary reasons for today's share price correction, as the stock turned ex-dividend.

This Rs 20-per-share payout adds to Vedanta's ongoing trend of rewarding shareholders with regular and substantial dividends. The company had previously announced two interim dividends in FY25:

In July 2024, Vedanta declared a second interim dividend of Rs 4 per equity share, totalling Rs 1,564 crore. The record date for this was August 3, 2024.

Earlier in May 2024, Vedanta announced its first interim dividend of Rs 11 per share. The record date for this dividend was set on May 25, 2024.

With the addition of the third interim dividend, Vedanta has declared a total dividend of Rs 35 per share in the current financial year.

Impact on Share Price and Market Sentiment

When companies declare substantial dividends, their stock price often adjusts to account for the payout. This is why Vedanta's share price experienced a dip as it turned ex-dividend today. The market price now reflects the removal of the dividend component, which will be paid out to shareholders shortly after the record date.

Despite the short-term decline, Vedanta's stock has provided exceptional returns over the past year, appreciating by nearly 95%. The stock's performance has been driven by the company's solid fundamentals, including its diversified portfolio, expansion strategies, and shareholder rewards.

In addition to its robust dividend policy, Vedanta remains in the spotlight due to its planned demerger, which is expected to significantly reshape the company's operations. The conglomerate, which has interests in sectors ranging from oil and gas to metals, is reportedly planning to split its aluminium, oil and gas, power, steel, and base metals businesses into independent entities. According to reports, Vedanta's zinc and newly incubated businesses are likely to remain within the parent company, Vedanta Ltd.

The separation of its businesses is seen as a step toward creating operational efficiencies and value enhancement, particularly as the global market for commodities like oil, gas, and metals continues to fluctuate. Analysts suggest that the demerger could further boost Vedanta's stock price over the long term.

Vedanta's recent credit rating upgrade has further bolstered investor confidence. Rating agency ICRA Ltd. recently upgraded Vedanta's credit rating from AA- to AA, citing improvements in its credit metrics, financial flexibility, and capital management.

According to ICRA, Vedanta has accumulated a robust war chest exceeding Rs 22,000 crore ($2.61 billion), stemming from cash reserves, dividend payouts, and a stake sale from its subsidiary.

With its robust financial health, consistent dividend policy, and strategic plans like the demerger, Vedanta is positioned to remain a key player in India's metals and mining industry. Investors will be closely watching how the company executes its demerger plan and continues to balance its capital allocation between growth initiatives and shareholder rewards.