Analysts now say the larger-than-expected dividend payout could be a sign that the government is getting ready for the much-awaited divestment of the oil PSU. Given the size of the dividend, there would be adjustment in strike prices in options segment of the BPCL stock, they said.
The stock traded about 1% higher at Rs 474 in early trade on Thursday.
The OMC declared a final dividend of Rs 58 per share, including a one-time special dividend of Rs 35 per share. The one-time special dividend declared appears roughly similar to the post-tax gain on the sale of investment in subsidiary Numaligarh Refinery, analysts said, while noting that the total dividend by BPCL for FY21 stood at Rs 79 a share.
The dividend yield for FY21 stood at 17 per cent at the prevailing market price.
Citi said the final dividend announced at Rs 58 per share was above Street expectations and would support the stock in the short term. The brokerage has a target of Rs 505 on the stock. Jefferies has a target of Rs 550 on the stock. Morgan Stanley sees the stock at Rs 480.
Girish Pai, Head of Institutional Equities at Nirmal Bang, said BPCL is being made ready for the divestment.
“They have actually gone out and divested some of their holdings in their associate/subsidiaries and now the very large dividend that they have announced this time around indicates that it is getting ready for divestment,” Pai said.
A large dividend per share was the highlight of the strong quarter, said JPMorgan. The brokerage said the gross marketing margin on diesel has stabilised and the progress on privatisation would now be the key for the stock.
“With the tentative recovery in refining margins and normalisation of marketing margin, the relative outperformance of India’s OMCs against the benchmarks should continue. We see
and PLNG stakes as the major remaining issues for the BPCL after it sold down its treasury stake, allotted stock options to employees, sold down its controlling stake in NRL, purchased a minority stake in Bharat Oman Refineries, and is in the process of merger of Bharat Gas Resources with itself,” JPMorgan said.
Adjustment to F&O segment
The dividend announcement was made post-market hours of Wednesday and the dividend per share announced was 12.2 per cent of the stock’s closing price of Rs 472. In the cash market, the dividend will be adjusted (deducted) from the spot price as of the ex-date. In options segment, the dividend will be deemed extraordinary and, hence, the strike price will get adjusted.
Generally, dividends that are below 5 per cent of the market value of the underlying stock are deemed ordinary dividends and no adjustment in the strike price is made.
For extraordinary dividends, which are at and above 5 per cent of the market value of the underlying security, as is the case with BPCL, the strike price is adjusted.
To decide whether the dividend is extraordinary, the closing price of the scrip on the previous day is taken. In cases where the announcement of dividend is made after the close of market hours, the same day’s closing price is taken as the market price.
For BPCL, the total dividend amount will be reduced from all the strike prices of the options contracts. For example, if a trader is holding a Call at strike 500, the new strike price applicable on the ex-date would become 442 after deducting Rs 58 per share.
The revised strike prices would be applicable from the ex-dividend date specified by the exchange.
Meanwhile, if shareholders at the AGM change the rate of the dividend declared by the board of directors, whether the dividend is ordinary or extraordinary will depend on the rate of dividend communicated to the exchange. It would be based on the closing price of the stock for the previous day.
