Firms urged to start paying dividends

preservation, thus restricting dividend payments.
But three years after the introduction of the multiple currency system, analysts say companies should start paying dividends to reward shareholders.
Companies have different reasons for not declaring dividends, with most of them forgoing dividends in favour of retaining resources.
Last year, only 30 percent of the companies listed on the Zimbabwe Stock Exchange managed to pay dividends, with Econet Wireless paying the highest of US12,16c per share for the full year.
The company had a 3,7 times cover and a dividend yield of 6 percent and an annualised earnings yield of 22 percent.
The economy grew by 4,5 percent in 2009 before registering a significant growth of 8,1 percent in 2010. Growth was projected at 9,3 percent last year.
Company performance had been expected to grow in tandem with economic growth but was suffocated by serious liquidity challenges.
An improved economic climate, coupled with a stable inflation rate, is expected to give impetus to domestic production and companies are expected to perform better.
However, some analysts say most companies are still undercapitalised due to liquidity challenges, making it impossible for them to declare dividends,” said a local analyst.
“Companies have to be recapitalised, perform well and pay dividends. However, in this US dollar economy, share prices increase at a slow pace and owners of companies should get something.”
The advantage of paying dividends is that it gives investors certainty about the company’s well-being, making it attractive to investors.
A history of paying dividends affects the price of a security in a positive way.
Out of all the listed companies, only 24 managed to reward shareholders, but more companies are expected to declare dividends this year.
Seed Co paid out a dividend of US2,35c per share, representing 3,85 times cover in its full year to March last year and is projected to continues paying a dividend in the region of four times.
The group’s share price is thus expected to trade in the region of US133c by the end of the year.
OK Zimbabwe pays a significant percentage of its earnings as dividend, which guarantees good returns to investors.
In the half year to September 2011, OK Zimbabwe declared a generous interim dividend of US0,15c per share which is 2,5 times cover giving an annualised dividend yield of 3 percent at a price of US10c.