1:10 Stock Split, 1400% Dividends Ahead: How To Be Eligible For These Rewards By FMCG Stock Nestle?

Stock market traders are in for a treat especially those who have a liking to FMCG giant Nestle's share price. That is because Nestle is offering an eye-bulging dividend of 1400% amounting to Rs 140 per share. And, that is not all, as icing on the cake, it needs to be noted that Nestle has also announced a stock split in the ratio of 1:10. Nestle stock has hit back-to-back new 52-week highs since the time it delivered healthy growth in Q2FY24 and announced these rewards for investors.

Last week, on Friday, Nestle shares ended at Rs 24,266.60 apiece on BSE with a market cap of nearly Rs 2.34 lakh crore. Nestle shares touched a new 52-week high of Rs 24,735.50 apiece on October 20th.

Dividends King:

Nestle, who is the maker of our favourite Maggi noodles, on October 19th declared a second interim dividend of Rs 140 per share having a face value of Rs 10 each for r the year 2023 on the entire issued, subscribed and paid-up share capital of the Company of 9,64,15,716 equity shares of the nominal value of Rs. 10 each.

According to the regulatory filing, Nestle's 2nd interim dividend for the year 2023 will be paid on and from 16th November 2023 to those members whose names appear in the Register of Members of the Company and as beneficial owners in the Depositories, as on the Record Date fixed for the purpose i.e., 1st November 2023.

As per Trendlyne data, Nestle has declared 68 dividends since May 2001. In the financial year 2022, the company paid a total dividend of 2,200% amounting to Rs 220 per share. Currently, its dividend yield is 0.95%.

Nestle Stock Split:

To enjoy the benefits of a stock split, Nestle announced shares sub-division in the ratio of 1:10 -- which means --- existing 1 equity share having a face value of Rs 10 each will be sub-dividend into 10 equity shares having a face value of Re 1 each.

However, the Record Date for sub-division/ split of existing equity shares will be intimated in due course by the company.

How To Be Eligible For These Rewards Given By Nestle:

To be eligible for these benefits of Nestle, you must ensure to do two things. Firstly, maintain ownership of Nestle shares and secondly keep track of the benefits.

On its website, in generic terms, Motilal Oswal explained the steps to be eligible for dividends. These are:

Maintain Ownership: Hold onto your company stock shares and avoid selling them before the ex-dividend date.

Stay Informed: Keep track of the company's dividend announcements, ex-dividend dates, and record dates to plan your investment strategy accordingly.

In the case of Nestle, the shares will turn ex-dividend on November 2nd which is also its record date. This date is important to avail the dividend benefits.

The method is similar for stock split as well.

Moreover, if you are an investor seeking dividends like that of Nestle, Motilal Oswal explained in its blog that two things yet again need to be considered. These are:

Dividend Yield: Evaluate the dividend yield, calculated by dividing the annual dividend payment by the stock price. A higher dividend yield indicates a potentially higher return on investment.

Dividend Stability: Assess the company's track record of consistently paying dividends and its ability to maintain or increase them.

"Being aware of dividend eligibility is essential for investors who want to generate regular income. Understanding the factors determining eligibility and taking the necessary steps can increase your chances of receiving dividends. It is important to stay informed and carefully consider key factors before making investment decisions. By doing so, you can optimise your potential for dividend income and make informed choices that align with your financial goals," Motilal's blog added.

Furthermore, explaining the key advantages of stock split, Motilal Oswal's blog said, that high share prices are one of the primary reasons why companies choose to split shares. When a company's share price rises exponentially, it can dampen investor demand. Hence, when a company carries a stock split it makes the shares more accessible.

Some of the other benefits of stock splits are --- 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.

Brokerages call on Nestle shares:

Kotak Institutional Equities while recommending to 'ADD' in Nestle shares, has raised its target price on the company.

In its note, Kotak said, "NEST reported 10%/21% yoy growth in domestic revenues/EBITDA, led by about 5% volume growth (akin to 2QCY23). Industry-leading revenue growth continues, even as yoy growth has moderated in line with the industry. GM expanded 380/170 bps yoy/qoq to 56.5% (120 bps ahead of expectation) and inched closer to normalized levels. Overall, resilient volume/topline growth with margin recovery (on track). We await more insights from the upcoming investor/analyst meet (October 25). We tweak estimates, rollover and revise FV to Rs24,500. Retain ADD." Earlier, the target price was Rs 23,500.

While Amnish Aggarwal - Head of Research, Prabhudas Lilladher believes that most of the gains from soft RM has been derived and incremental margin expansion will come at a tepid pace as shortfall in production is likely to keep prices of edible oils, Coffee, sugar, spices and wheat firm in the near to medium term.

Aggarwal added, "We expect volume growth to improve as Maggi LUP price revision has mostly come in the base and 4Q will also get a boost from late Diwali. LT growth drivers look intact given significant capex plans of the company. We factor in EBITDA margin expansion of 40bps beyond CY23 (23.6% with 140bps improvement). We introduce CY25 earnings estimate with 12.2% EPS CAGR over CY23-25. We expect steady returns despite rich valuations of 58.8x Sep25 EPS. Maintain 'Accumulate'." He sets a target price of Rs 25,471 apiece on Nestle.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.