I have wondered why HDFC bank pays out a dividends. Especially is cash is the raw material for their business, why give it out instead of reinvesting it into the business and earn higher returns.
Plus the dividends gets dissipated to some extent with taxes too.
I understand there may be a large shareholder base for whom the dividends serve as a income but then they could always sell a few stock units to get the cash.
With so much noise around the tight liquidity in the banking sector and real need to shore up deposits due to merger, doesn’t it make sense to halt the dividends or atleast cut to some extent?
Would the share tank majorly for such an action?
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