Worried about the arbitrary
approach to listed firms’ dividend declaration, capital market shareholders are
seeking regulatory approval, mandating quoted companies, especially top firms
by market capitalisation to submit statement of dividend policy and make it
public.
Dividend policy is the set
of guidelines a company uses to decide how much of its earnings it will pay out
to shareholders. It is a financial decision that refers to the proportion of
the firm’s earnings to be paid out to the shareholders
The shareholders, who spoke
with newsmen, argued that dividend should be distributed from the percentage of
earnings made by listed firms’ at the end of each financial year.
Regrettably, they noted
that many companies on the Exchange declare dividend arbitrarily without
considering what is actually due for investors from the earnings in accordance
with the corporate performance.
They further noted that
under mandatory disclosure, all companies will have to clearly outline their
dividend distribution policy, and will be forced to explain reasons for any
deviation from the stated policy. According to them, Nigerian retail investors
have suffered untold hardship and left to their own fate by listed companies
that have failed to declare dividend over the years.
Although in the last two
years, Nigeria’s equity market had suffered a setback in terms of performance
as a result of global and domestic economic transition that influenced the
market negatively. Consequently, economic indices continued to fall due to
unclear economic blue print of the government that failed to redirect the whole
system.
The earning power of many
companies on the exchange have been affected by this static economy, as
citizens and investors do not know the direction of government’s policy as
statements are not action plans.
Even in the face of the
macro economic challenges bedeviling the economy, shareholders maintained that
the key to any successful portfolio is stable growth, and earning additional
income from interim or full year dividends that give investors the flexibility
to earn some cash for reinvestment, or to meet their personal needs.
Investors also described
dividend policy as being relevant, especially for a country that is interested
in rapid and sustained economic growth, noting that it influences the decision
of both local and foreign investors
Specifically, the
President, Renaissance Shareholders Association, Ambassador Olufemi Timothy, while criticising that the dividend
policy have received little attention in developing countries such as Nigeria,
noted that companies are declaring dividend arbitrarily without considering
what is actually due to investors in accordance with the corporate performance.
He explained that if quoted
companies were compelled to declare a percentage of their profit as dividend
and make it consistent, it would enhance their performance, and sustain
investors’ confidence in the market.
He pointed out that such
dividend policy would help investors to ascertain how strong a company is in
terms of its fundamentals as well as enhance investment decision. Timothy added
that if such statement is made public, it would ensure the integrity of the
board in giving what is due to investors as well as compel them to embark on
businesses that would enhance profitability in order to fulfill the mandate.
An independent investor, Amaechi Egbo, said: “Now, under mandatory disclosure, all companies will have to
clearly outline their dividend distribution policy. This will bring an element
of predictability for investors as to what they can expect, going forward.
“Companies will
be forced to explain reasons for any deviation from the stated dividend policy.
While a company’s track record of dividend payout can give investors some idea
about the company’s approach to this, as a formally articulated policy provides
greater clarity and enforces discipline among companies.”
The President, Constance
Shareholders Association, Shaehu Mikail,
argued that capital market activities will record high level of transparency
and accountability if the Securities and
Exchange Commission (SEC), compelled firms’ to make their dividend policy
public.
He said, “Here in Nigeria, most of the quoted companies do not even
have a dividend and our regulators do not care about it even when shareholders
ask questions during the yearly meetings, when it comes to dividend policy,
they will never comment on it. There ought to be a standard way of declaring
dividend based on their earnings.” (Guardian)
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