Despite tightening of regulations, promoters continue to remain active on the trading floor. Obviously, this group has significant insider information and is in a position to time the market compared with ordinary investors. Several promoters can be seen raising money by pledging their holdings to play in the stock market. Institutional investors and promoters have contacts at high places and, thus, privy to sensitive information that can influence stock movements.

Market regulator Securities and Exchange Board of India (Sebi) received 241 requests for settlement, earlier known as consent process, in the financial year ended March 2018 (FY 2018) compared with 171 in FY 2017. Only 79 applications were rejected. From the 200 applications disposed, Sebi collected Rs 30.9 crore as settlement, legal, administrative and disgorgement charges compared with Rs 13.5 crore in FY 2017.All these factors sufficiently indicate that big investors and insiders have an edge over individual investors in the short term.

The problem is the focus on sound stocks does not result in immediate rewards. These counters usually take their own time to provide decent appreciation. Besides, there is no consensus as to the time frame for long-term investment. Even companies known for their corporate governance can stumble. Besides, the term is abstract.

There is difference of opinion on the parameters for a quality stock. The sweeping characteristics can encompass promoter control, number of independent directors, disclosures, balance-sheet strength, profit and loss account, operating cash-flow, corporate actions and various returns ratios.

Despite the disadvantages, iconic investors have made money by holding stocks for several years and even decades. Warren Buffett, among the richest persons in the world, says the investment horizon should be perpetual. He is known to have said: "Buy a stock thinking you will hold it forever." If investors do not feel comfortable owning a stock for 10 years, they should not own it even for 10 minutes.

Many investors live on dividend income. Similarly, several investors' shareholding has leaped on account of bonus shares. A prime example is Infosys. An amount of Rs 10000 invested in the initial public offering of the information technology bellwether in 1993 has grown to approximately Rs 2 crore, translating into a compounded annual growth rate of 35% over the last 25 years. This is a remarkable return by any standards. Infosys is not a solo show. There are many such stocks that have delivered manifold return.

Some companies have adopted novel ways to reward shareholders. Fast- moving consumer goods (FMCG) maker Hindustan Unilever (HUL) became the first company to issue bonus debentures in 2001.

Dividends, bonus shares, buybacks and stock-splits reveal the concern of the majority shareholders or promoters for the minority shareholders. Moreover, these actions reflect the underlying strengths of the business. In that sense, these policies can indicate the quality of the stock.

Dividends show that the profit is not cooked. Interim dividends on a regular basis indicate healthy operating cash-flow. On the flip side, a high rate of dividend signals lack of business opportunities and, thus, little scope for wealth creation. Nevertheless, dividend is a crucial income component for long-term shareholders. Many companies prefer to pay interim dividends at regular intervals to ensure loyalty of the public shareholders.

Using cash on the balance sheet to buy back and cancel the equity shares boosts the earning per share (EPS) of the remaining shareholders and moderates the price-to-earnings (P/E) ratio, making the stock attractive to new investors. The exercise demonstrates the seriousness of
the promoters in creating wealth for
their shareholders.

Berkshire Hathaway plays the buyback card efficiently and effectively. The investment company has executed several buybacks to drain out the balance sheet of excess cash. It opts for a buyback if the stock is available below its intrinsic value.

Though nothing changes on the ground, bonus issues can be beneficial to investors in many ways. First, the quantum of inflow increases if the dividend percentage is maintained. If the policy of the company is pay dividend of 50% on face value of Rs 10, bonus shares issued in the ratio of 1:1 will double the amount received by the shareholders.

Bonus shares, however, are subject to manipulation. The action is a book entry. Reserves are transferred to the equity capital. Dubious promoters can be seen using this tactic to attract unsuspecting retail investors. Such companies largely get weeded out if the long-term trend in dividends and bonus issues is scrutinized.

On the other side, stocks with a culture of rewarding shareholders tend to be expensive. They are likely to slow movers on the trading floor. Also, lack of growth opportunities weigh on capital appreciation. These companies usually are in mature industries. 

Capital Market explored companies with a track record of dividend payout, bonus shares and buybacks. Companies listed for a minimum of 10 years were considered. Only those with presence of mutual funds were shortlisted. Consistency in dividend outflow and issuance of bonus shares was examined. Besides, companies that have undertaken buyback of shares were preferred but was not a must.

Software bellwether Infosys has bought back a little over 11.30-crore equity shares at Rs 1150 per share, aggregating to Rs 13000 crore. The buyback was completed in December 2017. Since its IPO in 1993, bonus shares were issued on eight occasions: 1:1 in the calendar year (CY) 1994, 1:1 in CY 1997, 1:1 in CY 1999, 3:1 in CY 2005, 1:1 in CY 2007, 1:1 in CY 2015 and 1:1 in CY 2016. Bonus shares were issued in the ratio of 1:1 in the September 2018 quarter to celebrate the 25th year of public listing and improve liquidity.

A stock-split in the ratio of 2:1, with face value reduced from Rs 10 to Rs 5, was undertaken in FY 2000. An interim dividend of Rs 7 per share on face value of Rs 5 was declared in the second quarter of FY 2019.

Over two lakh employees cater to 1,204 clients including 20 with revenues of over US$ 100 million. As much as 60.4% of the revenues came from North America and 23.7% from Europe in FY 2018. All voting interests was acquired in Fluido Oy (Fluido), a Nordic-based sales force advisor and consulting partner in cloud consulting, implementation and training services, in October 2018 for euro 65 million. As per the guidance, revenues in constant currency are likely to increase 6-8% and the operating margins are expected to be 22%-24% in FY 2019.

Castrol India issued bonus shares on three occasions over the last two decades: 1:1 in CY 2000, CY 2012 and CY 2017. Interim dividends were issued on multiple occasions. The UK-based parent Castrol of the BP group holds 51% equity stake in the automotive and industrial lubricant manufacturer and marketer of synthetic, part synthetic and conventional engine oils and specialty lubricants for cars, motorcycles, trucks and tractors.

The nil-debt player for the last several years operates three production plants and has access to over one lakh retail sites that are serviced through 23 warehouses and three delivery hubs. Key brands include Castrol, Activ, CRB, GTX and Magnatec. A new original equipment manufacturer tie-up has been entered into with Piaggio. Existing contracts with Volkswagen and Volvo were extended in November 2017. High and volatile crude oil prices are one of the immediate challenges as crude oil derivatives such as base oil and additives are key inputs.

HUL is a subsidiary of Unilever, one of the world's leading suppliers of food, home- and personal-care and refreshment products, with revenues of euro 53.7 billion in CY2017. India's largest FMCG company has over 35 brands spanning 20 distinct categories including soaps, detergents, shampoos, skin care, toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream and water purifiers. Key brands include Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall's and Pureit.

Buybacks were undertaken in CY 2008 and CY 2011. A special dividend of 800% on face value of Re 1 per share was paid in FY 2013. Bonus debentures were issued in the ratio of 1:1 in FY 2004.

The board of directors in December 2018 approved a scheme of amalgamation between HUL and GlaxoSmithKline Consumer Healthcare (GSK). The all-equity merger will see 4.39 shares being allotted for every share of GSK. The transaction values the total business at Rs 31700 crore. The deal is subject to requisite approvals from the statutory authorities and the shareholders.

Godrej Consumer Products, among the leading FMCG companies in the country and certain emerging markets, declared two bonus issues in quick succession: 1:1 in June 2017 and in September 2018. Multiple buyback offers were undertaken from CY 2002 to CY 2008. Interim dividends are given regularly.

The 3x3 approach to international expansion involves building presence in the three emerging markets of Asia, Africa, Latin America across three categories of home, personal wash and hair care. Among the largest household insecticide and hair-care players in the emerging markets is also a leader in the household insecticides segment in India, the second largest player in Indonesia and is expanding footprint in Africa. The largest player in hair color in India and Sub-Saharan Africa and among the leading players in Latin America and number two in soaps in India is a leader in the air freshener and wet tissue markets in Indonesia.

Around 53% of the revenues came from India, followed by Indonesia (14%), Africa (22%), Latin America (6%), UK (5%) and others (1%) in FY 2018. Hair care is the largest category, with revenue contribution of 32%, followed by household insecticides (26%), personal wash (18%), air care (7%) and others (17%).

Procter & Gamble Hygiene & Health Care paid a special dividend of Rs 362 per share, or 3,620%, on face value of Rs 10 per share, in May 2017. One of the most liberal payouts in the history of Corporate India was to celebrate 30th anniversary of Make-in-India of flagship brand Whisper. Also, 1:2 bonus shares were issued in CY 1997 and CY 2003. With nil debt, cash and cash equivalents were Rs 392 crore end FY 2018.

Sanitary napkin brand Whisper continues to be the market leader in the feminine-care business. The presence in the health-care segment is mainly in the cough-and-cold category, with popular brands such as Vicks VapoRub, Vicks Cough Drops, Vicks Action 500 Advanced, Vicks Inhaler and Vicks BabyRub. The Old Spice brand in the male grooming segment is witnessing a decline in sales. Therefore, investment has been put on hold till the evolution of a winning proposition.

Subsidiary Gillette India is among the leaders in the men's grooming business, with brands such as Mach3, the country's leading premium system razor, and Gillette Guard, the entry-level system razor. Brand Simply Venus, a three-blade disposable razor, caters to the grooming needs of female consumers. A special dividend of Rs 154 per share, or 1,540% on face value Rs 10, was paid in June 2017.

Tata Consultancy Services is in the forefront in rewarding shareholders. A buyback worth Rs 16000 crore, among the largest in India, was completed in June 2017. The buyback, at a price of Rs 2850 per share, represented 2.85% of the paid-up capital. Bonus shares in the ratio of 1:1 have been issued in the current financial year. Bonus shares were also issued in FY 2007 and FY 2010. Interim dividends have been paid in each of the last 10 financial years. The average dividend payout over the last five years is 64%. A special dividend of Rs 40 on face value of Re 1 per share was paid in FY 2015.

With over four-lakh employees, the information technology services, consulting and business solutions provider partners with the world's largest businesses. There is presence in 46 countries, with 190 solution centers in 18 countries. Revenues of over US$ 19 billion were generated in FY 2018. The cash generation was a massive US$ 4.1 billion. Three new clients in the US$ 100-million plus revenue band were added in FY 2018, increasing the total to 38 comprising 13 new clients in the US$ 50 million plus revenue band, 17 in the US$ 20-million plus band and 40 in the US$ 10-million plus band. Key verticals served are banking-financial services-and-insurance, retail and consumer business, communication, media and technology and manufacturing.

Larsen & Toubro announced the first-ever buyback, of Rs 9000 crore, at a price of Rs 1500 per share, in August 2018. The engineering and construction giant issued bonus shares in the ratio of 1:2 in FY 2018, 1:2 in FY 2014, 1:1 in FY 2009 and 1:1 in FY 2007.

The operations of one of the world's top 30 contractors include buildings and factories, transportation infrastructure, power transmission and distribution, heavy civil infrastructure, water and effluent treatment, smart world and communication, metallurgical and material handling, geo-structure comprising the deep foundation and ground engineering segment, hydrocarbon, power plants and equipment, defence and aerospace, defence shipbuilding, heavy engineering, machinery and industrial products, electrical and automation and real estate. These segments can be categorized into construction, engineering-procurement-and-construction, defence, manufacturing and services.

There is presence in 30 countries. The order book of Rs 263107 crore end March 2018 represented 2.2x FY 2018 turnover. The infrastructure segment accounted for 74% of the consolidated order book, with 18% comprising heavy civil infrastructure, 17% buildings and factories, 14% transportation infrastructure, 14% power transmission and distribution, and 11% water and effluent treatment.

The group is made up of 93 subsidiaries, eight associates, 34 joint ventures and 33 joint operations. The listed companies within the group are L&T Infotech in the information technology solutions and services segment, L&T Technology Services in the engineering services business and financial services division L&T Financial Services.

Navneet Education is an educational syllabus-based content provider in the print and digital medium, a manufacturer of scholastic paper stationery and a publisher of general and children books. The portfolio also includes a wide range of scholastic non-paper stationery products. Over the years, several brands have been built in the educational content and scholastic stationery segments. These include Navneet, Vikas and Gala. There is a dominant market share of about 65% in the educational syllabus-based content in western India. Also, a new range of supplementary books for students of CBSE and ICSE boards and educational products are available across India.

Scholastic stationery is sold in the domestic market as Youva. It is also exported. Also, 19 CBSE schools are managed under the brand Orchids, The International School. Indiannica Learning Pvt Ltd, formally Encyclopaedia Britannica (India) Pvt Ltd, was bought in December 2016 to cater to the CBSE text-books market.

A buyback was implemented in FY 2017. Bonus shares were issued in the ratio of 3:2 in FY 2010 and 1:1 in FY 2001.

Pidilite Industries issued bonus shares in the ratio of 1:1 in FY 1997 and FY 2010. Buyback of equity shares at Rs 1000 per share, through the tender offer route, at an aggregate cost of Rs 500 crore, was completed in FY 2018. Products include adhesives and sealants, construction and paint chemicals, art and craft products, industrial adhesives, industrial resins and pigments and preparation. Key brands across multiple products are Pidilite, Fevicol, Dr Fixit, M-seal and Fevikwik. The domestic market is catered through 5,200 stock-keeping units of over 500 products, 4,900 distributors, 23 manufacturing units, eight regional offices and 26 warehouses. Manufacturing facilities are planned in Ethiopia and Bangladesh.

A technical collaboration has entered into with Jowat Se of Germany to provide a range of thermoplastic hot melt adhesives to cater to the needs of joineries and industrial consumers. Jowat adhesives will be sold in India and neighboring countries of Nepal, Sri Lanka and Bangladesh. Jowat SE is known for high-end adhesives used by modular and other wooden furniture. Also, a 70% equity stake was purchased in Cipy Poly Urethanes Pvt Ltd, a manufacturer of floor coatings using polyurethanes, epoxies, polyurea and polyaspartic polymers.

Knowledge-processor eClerx Services is a specialist services provider managing and improving complex data-driven processes. Operational support, data management and analytics solutions are supplied to over 30 global Fortune 500 clients. These include several of the world's leading financial services firms, online retail and distributors, interactive media, luxury brands and entertainment companies, high tech and industrial manufacturers, travel and leisure players, and software vendors.

Headcount increased 4% to 9,496 end September 2018 over end September 2017. Employees are spread across global delivery centers and offices in Verona in Italy, Phuket in Thailand, Mumbai and Pune in Maharashtra and Chandigarh, a Union Territory. Global client relationship locations are in New York, Philadelphia, Silicon Valley and Austin in the US, London in the UK, Dublin in Ireland, Milan in Italy, Munich and Hamburg in Germany and Singapore.

Around 65% of the revenues came from North America and 30% from Europe in FY 2018. The Top 10 clients accounted for around 70% of the sales. Mutual funds held 16.84% equity stake end September 2018 in the debt-free company.

Bonus shares were issued in the ratio of 1:2 in FY 2011 and 1:3 in FY 2016. Buybacks were executed with an aggregate outlay of Rs 40.50 crore in FY 2014 and Rs 258 crore in FY 2018. Cash and cash equivalents stood at Rs 600 crore end FY 2018.

Conclusion

Equity investment delivers superior returns over other investment even if only dividends are taken into account. Marico currently offers a dividend yield of mere 1.08%. However, the dividend yield works out to 3.9% considering dividend per share of Rs 4.25 for FY 2018 for those investors who had taken exposure to the stock five years ago. Importantly, the dividend yield will improve further as the business grows.

Half of the select stocks are commanding price-to-earnings (P/E) multiple in excess of 25. Companies with high P/E include P&G Hygiene (P/E 80), Info Edge (77), HUL (76), Britannia (71) and Pidilite (64). A recent sharp recovery has led to stocks turning pricy. Investment should be gradual and on correction.

Over half of the companies are from three sectors: FMCG, software and pharmaceuticals, pointing to the fact that businesses requiring lower capital tend to rewards shareholders handsomely. However, their inclusion will result in a skewed portfolio. Investors should look for opportunities across sectors.

Several of these stocks are extremely popular with institutional investors, adding to investors' comfort. Mutual fund holdings were in double digits in Cyient, Divis Laboratories, eClerx Services, Info Edge, Infosys, JB Chemicals, L&T, Navneet and Supreme Industries end September 2018.

Any change in corporate policies in rewarding shareholders due to business dynamics will hurt issuance of bonus shares, dividends and buybacks. Therefore, company- and industry-specific factors should not be ignored.

The investment theme primarily focuses on medium- to long-term investing. Thus, investors should stay on course despite intermediate ups and downs.