84 companies listed on the Nigerian Stock Exchange (NSE) have not paid dividends to their shareholders over the past five years.
According to information obtained from the NSE, the figure represents 49 per cent of the 171 companies listed on the daily official list of the NSE as at March 29, 2017.
Dividends are corporate earnings companies pass on to their shareholders, which can be in the form of cash payments or shares of stock. Dividends may be issued over various timeframes and payout rates.
For many investors, dividend-paying stocks have come to make a lot of sense in Nigeria given the almost cultural belief that making returns on investment is the essence of engaging in any investment or business plan.
Dividend policy, no doubt, influences the decision of both local and foreign investors.
The 84 companies that have not been paying dividends are spread across different sectors of the NSE, with some of them yet to pay dividends for over 10 years.
These companies are yet to return any money to shareholders who have invested in the growth of the quoted companies.
Under the Alternative Securities Market (ASEM), out of the 10 companies listed on the sector, seven have not paid dividends to their shareholders in the last seven years.
FTN Cocoa listed paid dividend under agriculture sub-sector last in 2010, while John Holts Plc under Conglomerate sub-sector paid dividend last in 2005.
Under the Construction/Real Estate sub-sector, John Holts, AG Leventis, SCOA, Arbico, ROADS, UAC Properties, Skye Shelter, Union Homes and UPDC Real Estate paid dividends last in 2005, 2016, 2015, 1996, 2014, 2013, 2014, 2015, 2013, 2014 and 2014, respectively.
In the brewery sub-sector, Champion Breweries Plc last paid dividend to its shareholders in 1986, Golden Guinea Breweries 1997 and International Breweries 2015.
In the chemical and paints sub-sector, First Aluminum, DN Meyer Plc and Portland Paints last declared dividends were in 2006, 2008 and 2011 respectively, while Africa and Premier Paints Plc’s last declaration dates back to 2001.
Also, under the Insurance sub-sector, out of the 26 stocks listed on the sector, 13 are yet to pay dividend in the last 10 years.
Investigations revealed that the poor performance of some of these stocks on the floor of the NSE arose from low returns that accrue to investors from their investment in the companies.
Capital market analysts have attributed poor performance of the companies to harsh operating environment and bad management, while others noted that the Securities and Exchange Commission (SEC) and the NSE insistence on some exorbitant levies and other unrealistic listing and post-listing requirements affected companies’ performance.
They said that for companies battling to keep their head above water due to recession and unfriendly business environment, meeting those charges and fees remain a mirage, as this is part of the reasons companies have not paid dividends to their investors in the last few years.
The managing director of HighCap Securities Limited, Mr. David Adonri, said it is natural for shareholders of quoted companies to anticipate dividend payment at the end of every financial calendar year and yet it must be appreciated that companies do and can decide to reinvest the profit made in the business through retained earnings.
According to Adonri, some believe that company profits are best reinvested back into the company, while others are in support of companies that return profits to shareholders.
The former group tend to view such company management as having run out of good ideas for the future of the company and may impact the fortunes of the stock in a clime that has been traditionally sold the message that dividend payout is a measure of progress.
He however said not paying dividend for a long period of years showed that the companies might be facing serious financial constraints, adding that it is not good for shareholders to have investments that do not yield dividends.
National coordinator, Progressive Shareholders Association of Nigeria, Mr Boniface Okezie, said it was heart-rending to have one’s investments tied down in companies that did not declare dividends.
“No one will be happy to have an investment that does not yield dividend, so the companies that do not pay dividends are not encouraging the shareholders. They should call for meetings and tell us why they have not declared dividends for this long,” he said.
A broker with Calyxt Securities Limited, Tunde Oyediran, advised investors to get close to their companies and find out why they have not been able to declare dividends.
“The companies also belong to the shareholders. So, it will be wise for investors to go nearer to their companies and find out why they are not performing in the payment of dividends,” he said.