Tata Stock Gives Rs 1.7 Crore Returns On 500 Shares In 20 Years; Q3FY24, 3rd Interim Dividend Ahead; Buy?

Conglomerate Tata Group-backed flagship company, Tata Consultancy Services (TCS) has been a beacon of success since listing in 2004. The year 2023 is ending, and TCS has given double-digit returns to the tune of 16.6% on BSE despite a challenging macro environment for the IT sector. It not only paid hefty dividends of up to 10,900% in 2023 but also carried a successful buyback of Rs 18,000 crore as well. That being said, TCS shares are also a true example of the equity market fetching long-term wealth than any other traditional investment schemes. In simple words, investment in TCS shares during listing has created a retirement corpus for investors as well.

Further, TCS shares will be in focus in January 2024 for their upcoming Q3 results and interim dividend. Currently, TCS stock is trading below Rs 3,800.

Established in 1968, TCS is part of Tata Group, India's largest multinational business group. However, the company was corporatized into a separate company with effect from 1st April 2004. Following a hugely successful IPO in July 2004, it was listed on the NSE and BSE, in India, on August 25, 2004.

Ahead of Q3 results, TCS shares have made investors rich, and long-term run even crorepati. It has also paid hefty dividend gains.

TCS Shares Make Investors Crorepati Since IPO Listing:

TCS's share price has come a long way, from an IPO issue price of Rs 850, premium public listing to even crossing the Rs 4,000 mark in 2022. Currently, TCS shares are away from their all-time high levels, however, brokerages expect a new breakout for record levels.

As per the TCS stock returns calculator, investors who bought this tech giant's shares in the early 2004s are sitting on crores of returns. So let's say, an investor bought 500 shares on August 25, 2004, at an estimated purchase price of Rs 850 for 500 shares. As per the calculator, this will lead to a purchase value of 500 shares at Rs 4.25 lakh.

While taking into consideration the current market price of Rs 3,783.25 on BSE, TCS has given a huge 3927.76% return on investment in 20 years. The 500 shares investment value rises to a corpus of Rs 1.711 crore while excluding the investment value of Rs 4.25 lakh, the real return would come to around Rs 1.67 crore for 500 shares as of now.

Also, the number of shares will increase from 500 to 4,000 as of now in TCS taking into consideration its dividend payment. Since listing, TCS has given Rs 19.85 lakh dividend income to investors for their 500 shares.

In terms of corporate actions, since August 2004, TCS has issued bonus shares in the ratio of 1:1 each on three different occasions such as July 2006, June 2009, and May 2018. While it has not announced any split in face value as of now. But it has declared a huge number of dividends.

This Tata Group-backed IT giant first started to reward shareholders with dividends in October 2005, and since then, has delivered 82 dividends. Currently, it has a dividend yield of 3.09%.

At present, TCS' share price's 52-week high and low levels are Rs 3,928.95 and Rs 3,070.30 respectively. But the all-time high of TCS shares is Rs 4,043 which was recorded on January 17, 2022. The highest closing price of TCS shares Rs 4,019.14 apiece was also witnessed on January 17, 2022.

On January 2nd, 2024, TCS share price ended at Rs 3,783.25 apiece, down by 0.72% on BSE with a market cap of more than Rs 13.84 lakh crore. TCS continues to be the largest IT firm in India, and second largest company after Reliance in terms of market cap.

Can Q3 Earnings and 3rd Interim Dividend Drive TCS To New Highs?

As per the regulatory filing, TCS' board of directors will be meeting on January 11, to consider and approve the audited standalone financial results of the Company under Indian Accounting Standards (Ind AS) for the quarter and nine-month period ending December 31, 2023.

Also, TCS has continued to declare huge dividends for its shareholders in FY24. More rewards are in the offing! TCS has declared that on January 11, the board will also consider the declaration of a third interim dividend to the equity shareholders.

For the third interim dividend, TCS fixed January 19 as the record date to determine eligible shareholders. This will also be the same day when TCS shares will trade ex-dividend.

In FY24 so far, TCS has paid first and second interim dividends up to Rs 24 (2400%) and Rs 9 (900%) per share to its shareholders.

For TCS Q3FY24, in its IT sector quarterly preview report, Kotak Institutional Equities said, "We forecast 0.5% c/c qoq growth and 1% on yoy basis. Our estimates include a US$50 mn or 0.7% contribution from the BSNL deal. We expect muted overall revenue growth due to furloughs in hi-tech and financial services. We expect a 30 bps increase in EBIT margin, despite weak revenues, due to Rupee depreciation and aggressive cost management. We expect moderate deal wins of US$8.5-9 bn. Quantum of deals announced has been muted especially in the North American market."

The focus will be on the outcome of the client budgeting cycle for CY2024. Expectations are high about a revival in spending. Kotak's note added, "We expect investor focus on (1) outcome of annual client budgeting exercise, especially in the critical financial services vertical, (2) state of spending in the impacted North America market and financial services, hi-tech & telecom verticals; (3) pipeline of deals; (4) state of discretionary spending and what would it take to revive the same; and (5) impact of GCC ramp-up on growth of companies and (6) levers to defend and increase margins."

Kotak expects TCS shares to be steady amidst Q3 results. It has recommended ADD on TCS shares for a target price of Rs 4,115. If TCS touches this target price, it will be the new all-time high.

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