360% Dividends Payout Ahead: IT Heavyweight Infosys To Trade Ex-Dividend This Week; Buy, Sell Or Hold?

Upcoming Dividends: Among hot dividend paying stocks to be in focus this week will second largest IT company of India, Infosys who is going to trade ex-dividend on October 25. The heavyweight stock was broadly under pressure after bittersweet Q2FY24 earnings, and near-term weak quarters ahead.

Infosys has declared interim dividend of Rs 18 per share for the current financial year 2023-24. In percentage terms, the dividend payout is 360%. This would be the first interim dividend of the fiscal.

Infosys has fixed October 25 as the record date to determine eligible shareholders for the dividend payout. Also, this will be the ex-dividend date for Infosys shares.

Going ahead, the company plans top pay the dividend on November 6, 2023.

Infosys has a consistent track record of rewarding its shareholders with hefty dividends. In FY23, the company paid a dividend of 680% amounting to Rs 34 per share to investors. On the current price level, Infosy's dividend yield is at 2.27%.

Last week, on BSE. Infosys shares ended at Rs 1427.20 apiece, down by 0.44%. Infosys has a market cap of Rs 5,92,342.82 crore, making it the second largest Indian IT firm after TCS.

Should you buy, sell or hold Infosys shares ahead of ex-dividend?

Here's what brokerages tell about Infosys shares after its Q2 earnings:

Emkay Global:

Infosys reported mixed operating performance in Q2. Revenue grew 2.3% QoQ CC, ahead of our expectations; however, adjusting for higher pass-through and one-timers, it missed our estimates. Q2 revenue growth was impacted by spend reduction in some large clients, partially offset by ramp-ups of large deal wins in cost optimization and vendor consolidation. EBITM expanded 40bps QoQ to 21.2%, ahead of expectations, aided by the comprehensive margin expansion program launched last quarter.

The company reported its highest-ever large deal TCV of USD7.7bn in Q2, where 48% of it was net new. Infosys has lowered its FY24 revenue growth guidance range to 1.0-2.5% CC YoY (earlier 1.0-3.5%), implying -1.9% to flat sequential growth in H2. Management attributed revenue guidance revision to weak discretionary spending, delay in decision making and slower ramp-up of large programs. Management has retained its EBITM guidance of 20-22% for FY24. We have cut FY24-26E EPS estimates by ~1%, factoring in Q2 performance and implied weak H2 outlook. We maintain BUY with a revised TP of Rs1,680 (earlier Rs1,700) at 23x Sep-25E EPS.

Motilal Oswal:

Infosys trimmed the upper end of its FY24 revenue growth guidance by 100bp to 1.0-2.5% YoY CC, on account of lower volume and low discretionary spending. We believe it is encouraging that despite multiple revenue guidance cuts, it has maintained its margin targets. We expect FY24 revenue growth at 2.4% CC, near the upper band of its guidance.

Despite near-term weakness, we expect INFO to be a key beneficiary of the acceleration in IT spends in the medium term. Based on our revised estimates, the stock is currently trading at 21x FY25E EPS. We value the stock at 24x FY25E EPS, implying a TP of Rs 1,660.

Kotak Institutional Equities:

Infosys reported revenue beat spruced up by pass-through and one-off elements. Cost-efficiency programs aided margin uptick. Four mega deals drove TCV of US$7.7 bn with US$3.7 bn net new component. Despite record high TCV, weak discretionary spending in the near term and slower ramp-ups led to another guidance cut, a minor one but still disappointing. Slower rampup of large deals is a revenue shift rather than a revenue loss. Strong TCV lays foundation for growth acceleration in FY2025E.

We cut FY2024-26 revenue and EPS estimates by 1-2% and tweak FV to Rs1,700, valuing the stock at unchanged 22X September 2025E earnings. Maintain BUY.

Choice Equity Broking:

Significant large deal wins lay a robust foundation for the company's future growth. The increasing adoption of the Generative AI solution, Topaz, is playing a crucial role in delivering consistent value and expanding market presence. Major deal wins and focus on cost optimization boosts confidence in the long-term growth prospects.

We have introduced FY26E and expect Revenue/EBIT/PAT to grow at a CAGR of 6.2%/10.1%/9.7% respectively over
FY23-FY26E. We maintain our ADD rating with a revised target price of INR1,655 implying a PE of 24x (unchanged) on FY26E EPS of INR76.9.

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.