Dividend declaration policy of most listed Companies needs scrutiny

Trader

Trader

Stock Analytic

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Am I correct in concluding that by and large dividends declared by listed companies that have made excellent profits such as banks, conglomerates, diversified companies etc., are totally inadequate. It is said that profits are being ploughed back for expansion, business development etc., etc,. The end result being that a paltry sum is paid as dividends to the shareholders who are really the owners of the company. Surely the Directors have a responsibility towards the shareholders to ensure that they receive a reasonable (cash) return on their investment. True, there may or may not be capital appreciation ... But even if there is, it is realizable only if the shares (of a part) is sold and many shareholders may not want to do so.
Only some companies where the a majority of the shares are foreign owned, declare reasonably good dividends.
Shouldn't this policy change?
One reason for this state of affairs may be that in the past, shareholders have not really made an issue of it. Therefore, at the AGMs of such companies should shareholders make it a point to bring this matter up?
Some 'support' in this regard, in this forum may help.

Antonym

Antonym

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Theoretically, shareholders are the owners of the company. Dividend distribution, ideally, should be a joint decision between the shareholders and the executive management (who have been entrusted with running the company).

In theory again, whether profits should be retained within the company or should be distributed should be determined by answering one question: Whose opportunities and needs are greater - the company's or the shareholder's?
Does the company have opportunities and plans to plough back the surplus - and generate better returns than shareholders can generate in their individual capacities? If not, the profits should be distributed as dividend.

It has been noted that dividend payout ratios may be low because of companies' expansion plans; shareholders of such companies are foregoing current dividends for potential share price appreciation or higher future dividends.

Trader

Trader

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Antonym wrote:Theoretically, shareholders are the owners of the company. Dividend distribution, ideally, should be a joint decision between the shareholders and the executive management (who have been entrusted with running the company).

In theory again, whether profits should be retained within the company or should be distributed should be determined by answering one question: Whose opportunities and needs are greater - the company's or the shareholder's?
Does the company have opportunities and plans to plough back the surplus - and generate better returns than shareholders can generate in their individual capacities? If not, the profits should be distributed as dividend.

It has been noted that dividend payout ratios may be low because of companies' expansion plans; shareholders of such companies are foregoing current dividends for potential share price appreciation or higher future dividends.

Response to Para 1 :
Agreed. But in practice, it is not so.

Response to Para 2:
The need to retain profits for good reasons is fair enough. But there must be a happy balance. Shareholders too must have a fair return on an annual basis.

Response to Para 3:
Those higher future dividends just do not seem to materialize !

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Dividend declaration policy of most listed Companies needs scrutiny

1 Dividend declaration policy of most listed Companies needs scrutiny Mon May 16, 2011 4:59 pm

Trader

2 Re: Dividend declaration policy of most listed Companies needs scrutiny Mon May 16, 2011 5:22 pm

Antonym

3 Re: Dividend declaration policy of most listed Companies needs scrutiny Mon May 16, 2011 6:51 pm

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4 Re: Dividend declaration policy of most listed Companies needs scrutiny

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