Dividend and Compound Annual Growth Rate (CAGR), two key metrics for investors, offer distinct yet complementary perspectives on stock performance. While dividends provide a steady stream of income, CAGR captures the overall growth trajectory. Ideally, both work in tandem for a balanced investment portfolio.
Dividends, paid out periodically from company profits, reward shareholders with tangible returns. Their consistency can offer stability, particularly in mature industries, and the yield, calculated as dividend per share divided by stock price, serves as an immediate income indicator.
CAGR, on the other hand, takes a longer-term view. It summarizes the average annual growth of an investment over several years, accounting for the compounding effect where reinvested earnings further fuel growth. This single metric is valuable for comparing performance across different assets or periods.
ITC Ltd
The share price has grown at a 5-year CAGR of 10.84 percent from Rs 275 per share on December 14, 2018, to its current level of around Rs 460 per share.
Along with capital gains, ITC is also known to be a dividend-paying stock. Over the last five years, the ITC has declared ten dividends totaling Rs 58.8 per share.
If an investor purchased 100 shares of ITC Ltd 5 years ago for around Rs 27,500, the current value would be around 46,000 today. Additionally, the total gains from dividends received between 2018 to now would be Rs 5,880, or 21.3 percent of the initial investment.
ITC, founded in 1910, is the country’s largest cigarette manufacturer and seller. Currently, ITC is active in five business segments: FMCG Cigarettes, FMCG Others, Hotels, Paperboards, Paper and Packaging, and Agri-Business.
The company’s 5 Year CAGR of net revenue is 10.3 percent from Rs 43,449 crore in FY18 to Rs 70,919 crore in FY23, net profit is 12.24 percent from Rs 11,493 crore in FY18 to Rs 19,477 crore in FY23.
ITC Limited has a low price-to-earnings (PE) ratio of 28 compared to its peers, the company is debt-free with a net profit margin of 25 percent a return on equity of 30 percent, a return on capital employed of 39 percent, and a dividend yield of 4 percent.
Marico Ltd
The share price has grown at a 5-year CAGR of 7.74 percent from Rs 372 per share on December 14, 2018, to its current level of around Rs 540 per share.
Along with capital gains, Marico is also known to be a dividend-paying stock. Over the last five years, Marico has declared 12 dividends totaling Rs 38.25 per share.
If an investor purchased 100 shares of Marico Ltd 5 years ago for around Rs 37,200, the current value would be around 54,000 today. Additionally, the total gains from dividends received between 2018 to now would be Rs 3,825, or 10.2 percent of the initial investment.
Marico Limited is a leading consumer goods company in India, specializing in global beauty and wellness. It is present in over 25 countries across Asia and Africa’s emerging markets. It develops leading brands in hair care, skin care, edible oils, healthy foods, male grooming, and fabric care.
Marico Limited’s five-year compound annual growth rate (CAGR) of net revenue is 9.08 percent from Rs 6,322 crores in FY18 to Rs 9,764 crores in FY23, net profit is 9.8 percent from Rs 827 crores in FY18 to Rs 1,322 crores in FY23.
Marico Limited has a low price-to-earnings ratio of 49.5 compared to its peers, the debt to equity ratio is 0.13, a return on equity of 37 percent, a return on capital employed of 45 percent, and a dividend yield of around 1 percent.
Tata Consultancy Services Ltd
The share price has grown at a 5-year CAGR of 12.9 percent from Rs 1,989 per share on December 14, 2018, to its current level of around Rs 3,650 per share.
TCS has declared 29 dividends totaling Rs 374 per share over the last five years. It displays an investor’s consistent income as well as capital gains over the previous five years.
If an investor purchased 100 shares of TCS Ltd 5 years ago for around Rs 1,98,900, the current value would be around 3,65,000 today. Additionally, the total gains from dividends received between 2018 to now would be Rs 37,400, or 18.8 percent percent of the initial investment.
Tata Consultancy Services is the company’s flagship and a member of the Tata group. For more than 50 years, it has partnered with many of the world’s largest businesses on their transformation journeys through IT services, consulting, and business solutions.
Tata Consultancy Services Limited’s five-year compound annual growth rate (CAGR) of net revenue is 12.8 percent from Rs 1,23,104 crores in FY18 to Rs 2,25,458 crores in FY23, net profit is 10.3 percent from Rs 25,880 crores in FY18 to Rs 42,303 crores in FY23.
TCS has a low price-to-earnings ratio of 30 compared to its peers, the company is debt-free with a net profit margin of 18.7 percent a return on equity of 47 percent, a return on capital employed of 64 percent, and a dividend yield of 3.5 percent.
Written by Sriram KV
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