2700% Dividend: TCS Share Nears 1-Year High On Turnng Ex-Dividend; Buy For Target Of Rs 4,000-5,000

Tata Group-backed tech giant of India, Tata Consultancy Services (TCS) neared its 1-year high on Friday as the share price turned ex-dividend for an upcoming dividend payout to the tune of Rs 27 per share. In percentage terms, TCS will pay up to a whopping 2700% dividend next month. After exceeding estimates in Q3 amidst a challenging environment, the majority of analysts are optimistic about TCS.

At the time of writing, TCS shares traded at Rs 3,936.45 apiece, up by 0.84% on BSE with a market cap of over Rs 14.39 lakh crore. However, in the early trade, TCS shares rose by over 1.5% to hit an intraday high of Rs 3,963 apiece, very close to its 52-week high of Rs 3,965.

In a year, TCS shares have rallied by nearly 17% on BSE.

India's largest IT firm in terms of market share declared a third interim dividend of Rs 9 per share or 900% for FY24, alongside a special dividend of massive Rs 18 per share or 1800%. Together, TCS will pay up to 2700% dividend amounting to Rs 27 per share.

As per the regulatory filing, the third and special dividend will be paid on Monday, February 5, 2024, to eligible equity shareholders of the company. These eligible shareholders are those whose names appear on the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares as of Friday, January 19, 2024, which is the Record Date fixed for the purpose.

Due to the 'T+1' settlement type on stock exchanges, TCS share price also traded ex-dividend on January 19.

In the current financial year, so far, TCS already paid the first and second interim dividends of Rs 9 each (1800% each) to its shareholders.

Should you buy TCS share price?

Post Q3 results, in its research note, Religare Broking said, TCS numbers were marginally above our estimates for Q3FY24.

The brokerage highlighted that despite Q3 being a muted quarter and also uncertainty around the macro environment hovering, TCS delivered decent numbers for the quarter. Amongst the geographies, the UK witnessed marginal growth but strong growth was driven by emerging markets like India while amongst verticals Energy, Life science, healthcare & manufacturing contributed strongly. North America & BFSI which were the large contributing geography and vertical performance was muted and witnessed de-growth of 3% each in constant currency.

Besides, technology, media & communication verticals also witnessed a slowdown. However, going ahead, their focus will be on reviving growth from these sectors, it added.

Religare also cited that TCS's management plan is to improve and maintain EBIT margins above 25-26%. Also, management plans to further moderate attrition with the plan of hiring freshers from college campuses and growing talent organically by providing necessary training.

On the outlook and valuation, Religare's note said, "We believe macro situations and client spending on discretionary would take more 1-2 quarters of recovery. However, from a long-term perspective, we remain bullish on TCS given its strong product portfolio, healthy order book, investment towards technology as well as its focus on continuous improvement in margins makes it one of the top picks in the sector."

On the financial front, the brokerage has estimated its revenue/ EBIT to grow at 9%/11.6% CAGR over FY23-26E and maintaining its Buy rating on the stock with the revised target price to Rs 4,359, assigning a P/E multiple of 26x on FY26E EPS, which is similar to its 10-year average P/E multiple.

Meanwhile, VLA Ambala (SEBI Regd. Research Analyst) said, "TCS is currently showing signs that suggest further pullback might be on the horizon. Investors looking to capitalize on this should consider waiting for a minor pullback to optimize their entry point. The advisable buying range for TCS is between Rs 3,800 to Rs 3,750. With a set stop loss of INR 3,580, the stock has a potential target range from Rs 4,000 to Rs 5,500. This reflects a blend of cautious optimism with a clear risk management strategy."

She also added, that investors should note that these views are based on current market conditions and are subject to change as per market dynamics. It is advisable to conduct personal research and consult with a financial advisor before making any investment decisions.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or 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.