Home ›› 07 Nov 2022 ›› Stock
At least 29 publicly traded firms failed to pay any dividends to their shareholders for the fiscal year 2021-22 as the ongoing global economic strains as well as the Covid-19 pandemic burned their balance sheets.
Meanwhile, many firms posted net losses in FY22 over the past few years owing to the backlash in their business progress.
The Bangladesh Securities and Exchange Commission (BSEC), however, went hardline in recent years against those listed companies not paying dividends.
As per the Dhaka Stock Exchange (DSE) data, out of 29 companies failing to offer dividends in FY22, eight were from the textile sector.
Of them, three firms reported a net profit in the fiscal but did not declare any dividends for their shareholders.
The number of firms paying no dividends in fiscal 2020-22 stood at 38, including seven profit makers. The figure was recorded as 33 in FY20.
The stock market regulator, in the last fiscal year, had asked the companies failing to offer dividends, to appear before the commission to explain the reasons behind their failures to offer dividend payouts.
“The BSEC is looking to enhance its surveillance move to check fraudulence, if any, behind the companies’ dividend payouts failure,’ BSEC Commissioner Shaikh Shamsuddin Ahmed told The Business Post.
“They (companies) would be ordered to explain the reasons for their failure, and stern actions would be taken against those failing to satisfy the regulator,” he added.
Several pandemic-hit firms could not pay any dividends to their shareholders, but some companies did not offer dividends intentionally, said a top stockbroker.
A company will be shifted down to the ‘Z’ category if it fails to declare any dividend, does not hold an annual general meeting regularly, or remains inoperative for more than six months, according to the stock exchange rules.
The Z-category stocks refer to poor performers, and experts and analysts advise general investors to remain cautious before betting on those shares.
Listed companies across the world, however, were forced to cut or suspend their dividend payouts to save cash in the wake of the Covid-19 pandemic.
Zeal Bangla Sugar Mills said in a note, its earnings per share (EPS) dropped due to a net loss in FY22.
Its net operating cash flow per share (NOCFPS) also plunged due to a decrease in cash flows in operating activities compared to the previous year while its net assets value (NAV) per share increased due to a hefty liability against the previous year, it stated.
Some companies did not pay dividends aiming to save capital for future business purpose while some could not offer it due to their inconvenient boards, said a capital market analyst.
“The stock regulator is monitoring those companies who did not pay dividends despite their business growth. We will hold them accountable because the commission always prioritises the investors’ interests,” said a high official at the BSEC.
“Some listed companies lack good governance which lays one of the prime causes behind their failure to offer dividends,” said stock market analyst Professor Abu Ahmed.
The sponsors and directors of many companies often trade shares anonymously violating the securities rules. They also tend to make false financial reports not to pay dividends to their shareholders, he said.
The general investors need to be more careful about injecting their funds into those companies, Abu Ahmed continued.
The stock exchanges are the primary regulators, and the BSEC needs to be more vigilant on the poorly performing companies, opined Professor Abu Ahmed.
According to the DSE listing regulation, if a company fails to declare dividends for five years in a row from the last date of declaration of dividends or the date of its listing on the exchange, it would be delisted from the market.
