The financial uncertainty amid the Covid-19 pandemic has significantly increased the number of companies paying out none or very little dividend to their shareholders this year.
A study of the Dhaka Stock Exchange data updated on 12 November reveals that the portion of listed companies announcing no dividends reached 20% – which doubled in a year.
Until now, of the companies who closed their books in June, 196 finished their board meetings where the directors analysed the business performance, current situation and decided on dividends.
A shocking number, 41 companies came up with the unpopular announcement of zero dividends for the latest fiscal year. A year ago, of 301 listed companies, including those who closed books in December and other months, only 29 were in the no-dividend segment.
Frustrating investors, there appears a significant spike in the number of companies announcing poor dividends ranging between 1% and 9%. Of the 301 companies, 73 paid less than 10% dividends in the previous year, which has jumped to 90% this year.
The securities regulator now calls for an explanation from the management of the companies who are announcing no or poor dividends despite their ability. A few dozens of them are asked for an explanation within three working days to justify their dividend decision.
This year, also the number of companies paying more than 10% dividends, be it cash or stock dividends, fell to nearly 14% from 30% a year ago.
The same reality appears to be true when one counts the number of companies announcing even higher dividends.
However, most of the blue-chip companies are still paying robust dividends encouraged by their sound financial bases.
Historically, in Bangladesh, the companies having a significant institutional shareholding and also the ones whose sponsors and directors hold a large majority of shares tend to pay high cash dividends while minority shareowners ruling the company tend to avoid paying out more cash from the companies, depriving general investors, said stock market expert Abu Ahmed, an emeritus professor of economics at the University of Dhaka, told The Business Standard.
This year, a large number of companies seem to have grabbed the pandemic as a pretext to indulge their old habit, fears Professor Ahmed.
Azam J Chowdhury, president of the Bangladesh Publicly Listed Companies (BAPLC), also the key promoter of some listed companies including MJL Bangladesh, Prime Bank Limited, believes if a company can manage its cash flow moderately, they should not cut dividends drastically.
Cash dividend is what real investors count on, and a publicly-listed company must care about their interests and confidence, he said while talking to The Business Standard recently.
On the other hand, BAPCL Vice-President Riad Mahmud advocates for being conservative during the uncertain days in business.
"The uncertainty in business is real. You would find no or poor dividend-paying companies are maximum in number in the sectors who are hit hardest in the pandemic," he said.
The textile sector being one of the worst sufferers amid the pandemic got a maximum of 12 companies paying no dividends this year as their financials are also in a sorry state.
Multinationals operating in various industries, pharmaceuticals or fast-moving consumer item manufacturers, and power producers are leading the dividend payment table.
"If the business situation restores, the headwinds go away, a company can pay interim cash dividends even a few weeks later," added Mahmud, also the managing director of National Polymer Industries Ltd.