Globally, dividends fell by over a fifth to $383.2 billion the second quarter of 2020 as companies were forced to cut or suspend their shareholder payouts to conserve cash in the wake of the COVID-19 crisis, and the same is happening in Bangladesh too
The number of companies not paying any form of dividend to their shareholders for the 2019-20 financial year increased by 38.5 per cent from the previous year as the global coronavirus pandemic bit hard on their balance sheets.
As of Sunday, 36 companies were found to have suspended dividend for the financial year that ended on June 30, but the number could very well be higher as 29 companies are yet to unveil their full-year earnings yet.
Of the companies that have not announced any cash or dividend, 19 did not announce any dividend in the previous year as well, meaning they were already trading as junk stocks.
But this year, 17 companies joined them as they looked to conserve cash and strengthen their balance sheet amid the pandemic.
Their failure to give their shareholders a payout this year means they are heading to the ‘Z’ category now, as per securities rules.
It will be quite the comedown for Golden Harvest Agro Industries,Saiham Textile, Saiham Cotton, AFC Agro, Gemini Sea Food, Malek Spinning and Samorita Hospital -- all ‘A’ category shares.
A-category shares mean the companies have declared dividends of 10 per cent or more in the previous year.
The rest of the companies were ‘B’ category stocks, meaning they had handed out dividend of less than 10 per cent in the 2018-19 financial year.
Companies across the world too were forced to cut or suspend their dividend payments to conserve cash in the wake of the COVID-19 crisis: globally, dividends fell by over a fifth to $383.2 billion the second quarter of 2020.
The pandemic hits most of the listed companies, said Md. Moniruzzaman, managing director of IDLC Investments.
“For this reason, some news companies do not pay any dividend to shareholders. On the other hand, some companies' boards have willingly declared ‘no dividend’,” he added.
Many companies were reeling from the impact of the coronavirus, so they could not pay dividends, saidMd Shakil Rizvi, a director and former president of the Dhaka Stock Exchange.
“Besides, many are not paying dividends thinking about the future of the business. On the other hand, many companies could not pay dividends due to the incompetence of their directors,” he added.
Most of the listed companies are suffering from lack of good governance, said Abu Ahmed, an honorary professor at the Dhaka University’s economics department and a stock market analyst.
“Companies’ sponsor0directors often trade shares anonymously, violating securities laws.
They tend to make false financial reports. For this reason, some companies couldn’t pay any dividends to their shareholders. Because of this, general investors will not invest less and less in the capital market.”
If the stock exchanges being the primary regulators, along with the Bangladesh Securities and Exchange Commission, were serious and vigilant, such a grave situation in the market would not have prevailed, he added.