3 companies with high cash reserves which gave consistent dividends over 5 years

Such high cash holding companies can utilize their surplus cash for expanding their business, or reward their shareholders through dividends, bonuses and buybacks.

Dividend track record: Abbott India, Novartis India and Castrol India have a good dividend track report and has consistently paid dividends for the last 5 years.

We drilled deeper to check out how the company spends the cash that it earns through operations. And while cash flows have been strong, the gross block addition in each of the three companies has not changed much. This indicates that the companies are not investing enough back into expanding their business.

However, investors should bear in mind that companies with surplus cash may not necessarily be substantial outperformers, as evident from the chart below.

Two themes that seem common to the 3 companies:-

Conclusion 1 – Investors sought consistent fixed income (dividend) returns every year rather than significant price upsides

Conclusion 2 – Sales were more or less constant year on year for the past 5 fiscals, prima facie indicating that no substantial capacity expansions may have been undertaken, underscored by the flattish trend in the gross block figures as well. This can be mainly attributed to a greater percentage of profits being distributed as dividend. See chart below.

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