Investors beware: Bountiful dividend payout may not be intended to reward loyalty

THE age old adage that “sharing is caring” shouldn’t end with a mere three words. It should have read “sharing is caring for who?” or “Are you sure that sharing is caring”?

This is especially so in the context of dividend payouts – especially those in big amount in view of extraordinary gains – whereby public listed companies (PLCs) often brag that their noble action is to reward shareholders for their loyalty.

As expected, the shareholders will be quickly blinded by the sight of money – so thankful for their lucky star and the company’s generosity – that they will even drive the share price higher as if to reciprocate the reward.

On the hindsight, while it good to feel grateful that a hefty dividend payout is able to beat the current 12-month fixed deposit rate averaging 3%, the major shareholders are silently (or stealthily) laughing all their way to the bank in multiple suitcases of cash.

This sentiment comes to light following the recent revelation by the Forbes’ 2020 billionaires list with eight of Malaysia’s top 10 wealthiest tycoons bagging almost RM2 bil worth of dividends from the recently announced financial results of Bursa Malaysia-listed PLCs for the quarter ended Dec 31, 2020.

Of the eight tycoons, Tan Sri Teh Hong Piow raked in RM668.18 mil based on his 23.42% shareholding in Public Bank Bhd (Malaysia’s third largest banking group which declared a 13 sen/share dividend for its 4Q FY2020 that is payable on March 22) and LPI Capital Bhd which doled out a second interim dividend of 44 sen/share for its 4Q FY2020 on March 1.

However, what strikes the eyes most would be the RM460.45 mil that went into the coffers of glove billionaire Tan Sri Dr Lim Wee Chai who amassed RM460.45 mil in dividend during the quarter ended Dec 31 last year.

The Top Glove Corp Bhd founder and executive chairman made his fortune from the interim dividend of 16.5 sen that the world’s largest rubber glove maker declared during its 1Q FY2021 ended Nov 30, 2020.

Lim’s wealth from dividend payout is posed to surge a further 54% to RM710.12 mil by mid-2021 given that Top Glove has recently announced an interim dividend payment of 25.2 sen per share for its 2Q FY2021 ended Feb 28, 2021 (which is payable on April 6).

This brings back the memory of AirAsia Group Bhd classic special dividend payout of 90 sen/share even as the budget carrier’s net profit came in substantially lower at RM96.09 mil for its 1Q FY2019, down 92% year-on-year from RM1.14 bil.

This bumper payout came on the heels of a 64 sen/share for its 4Q FY2018 and 12 sen for FY2017.

“Coincidentally, the bumper dividends came after the massive share placement to Tune Live Sdn Bhd, of which its co-founders Tan Sri Tony Fernandes (also AirAsia’s group CEO) and Datuk Kamarudin Meranun are the only two shareholders,” reported the Edge Financial Daily (already ceased publication) dated May 30, 2019.

Devanesan Evanson

“The duo currently control a 32.5% stake or 1.075 billion shares in AirAsia through Tune Live and Tune Air Sdn Bhd. A special dividend of 90 sen per share means both co-founders are expecting a dividend cheque of RM967.5 mil).

Picking his brains on whether bountiful dividend payouts are mere gimmick or genuine generosity, Minority Shareholders Watch Group CEO Devanesan Evanson tells FocusM:

Public listed companies (PLCs) should give reasonable dividends and use the rest to pare down their bank loans. Also, it does not make sense to declare high dividends when the PLC is borrowing from the banks.

Why not plough the cash back to the PLC and provide better returns through bottom line improvements and share price accretion and regularity of decent dividends.

It is the duty of the PLC to use cash in the best possible manner to enhance long term shareholder value … and this may not mean just declaring exceptionally high dividends.

High dividends though can be justified for cash rich PLCs whose business has more or less plateaued. – March 18, 2021



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