Vedanta’s special dividend yield stands at 6%, should you buy the shares?

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Shares of mining major Vedanta advanced 3.24% or Rs 9.65 to Rs 307.7 apiece a day after the company announced its first interim dividend of Rs 18.50 per share. The decision was confirmed at the meeting of the Board of Directors held on September 1, the company said in a regulatory filing.

“Vedanta has informed the Exchange that Board of Directors at its meeting held on September 01, 2021, declared Interim Dividend of Rs 18.5 per equity share,” the National Stock Exchange of India (NSE) noted.

In a separate exchange filing the company stated that the record date for the purpose of determining the entitlement of the equity shareholders for the said dividend “is being fixed as Thursday, September 9, 2021”.

Going by the current market price there is an opportunity to earn around 6% returns by buying shares before the record date.

“The interim dividend of Rs. 18.50 is indeed a significant sum as the face value of the share is just Re 1 thus amounting to an 1850% dividend. This is also a good opportunity for the investors to avail this significant dividend by buying the shares and holding them till the record date of 9th September 2021. The return at the CMP is around 6% which is significant and therefore it provides a good opportunity to acquire the shares of this company and hold them till record date. Investors may utilize each dip in the price to acquire as this would help to optimize the total return,” said Gaurav Garg, Head of Research at CapitalVia Global Research.

However, one also needs to understand that once the shares go ex-dividend there is the possibility of a correction in the prices of the shares. “In the long run, there will be price correction as the shares go ex dividend. Additionally, one will need to pay tax on dividend earned according to their tax slabs hence leaving very little or no room for investors earn anything out of it,” suggest Arun Kejriwal, Founder of Kejriwal Research & Investment Services.