Unpaid Dividend’s Worries Grow In Insurance, Other Markets
Increasing non-payment of dividends is unsettling to shareholders who have turned annual meetings of companies into battlegrounds where they vent their anger on management and the board of directors.
The meetings are sometimes turbulent especially when the management staff are compensated with increased salaries while the shareholders are left out.
Dividend is a distribution of a proportion of profits earned in a year by a company to its shareholders, and which the National Coordinator of the Progressive Shareholders Association, Boniface Okezie, said is a good development to the investing public and to the capital market amidst the higher inflation rates and dwindling economy.
Some weeks ago, some companies were at the receiving end of verbal attacks from shareholders over the non-payment of dividends. Shaerholders at the annual meetings of Guinea insurance and Sovereign Trust Insurance had unkind words for the boards which they claimed had denied them returns on their investments by the two underwriting firms.
For instance, Sovereign Trust Insurance has not paid dividends to its shareholders for 10 years according to Peter Owolabi, one of its shareholders while Guinea Insurance is said to be synomous with persistent financial losses under which it hides to deny its shareholders of dividends. Audited annual reports of Guinea Insurance Insurance shows it recorded a N227.6 million loss in 2020 and also, N23.5 million in loss in 2021.
Owolabi said shareholders are not happy with the company for the non-payment of dividends on which many depend solely to survive. He was angered about the persistent no dividends despite the increase in the welfare of the management staff.
“Shareholders are not happy. For the reason that no dividends for the past ten years. We are not happy. Maybe we have to meet and agree that we will cut your salary by 50 per cent and carry placards if there is no dividend next year,” Owolabi stated.
“Many of us are old and retirees, none of us is working, we depend on whatever you give us. it is so sad that you have given us nothing for the past 10 years while you earn money monthly, and even, increasing your salaries. You are getting compensation, getting this and that, nothing for us. Even during the COVID-19 period, you did not remember the shareholders. This is not good and make sure you give us dividends next year,” he added.
Checks at the audited financial account of the company showed that the Net premium Income of Sovereign Trust rose by 11.2 per cent from the N6.5 billion in 2020 to N7.2 billion in 2021. Similarly, the Company’s Profit After Tax jumped to N974 millionfrom from N687 million recorded in year 2020 representing an increase of 42 per cent.
In 2019, Sovereign Trust Insurance audited accounts showed N503 million Profit After Tax, up from N344 million in 2018, representing 46 per cnt increase while the company’s Gross Premium written in 2019 stood at N10.8 billion, a paltry 3.43 per cent increase over the N10.5billion written in 2018. In 2019, the net claims paid increased to N2.2 billion as against N1.7 billion that was paid the previous year.
Ayodele Kudaisi, a member of the Independent Shareholders Association of Nigeria (ISAN) is also disapppointed that dividend was not paid to the shareholders for the 2021 operational year.
“Again, there are no dividends for shareholders and this is not too good,” she said.
Although Oluseun Ajayi, the board Chairman, assured of a better treatment of the shareholders from next year, he attested to the company’s inability to render yields on investments to the shareholders.
“One thing i am extremely happy to report to everyone today is that as of the end of the first quarter of this year, which was repeated at the end of the second quarter, we have come out of negative retain earnings. We never knew that it was going to be this long before we exit negative retain earnings. Now that we are better, I had told the management that we must sustain it so that we can pay dividends’.
“You are all aware how we got into negative retain earnings. It was in conversion to IFRS that pushed the whole industry into negative retain earnings. Some people are still in it 7 to 8 years after, for some people, their negative retain earnings have even grown. So i thank God that we are out of that. And i can confidently tell you that we are working on it to ensure that we resume dividends payment from next year based on this year’s account,” Ajayi assured.
The situation is the same at Guinea Insurance where the National President of Progressives Shareholders Association of Nigeria, Okezie Boniface berated the board and management over its persistent financial losses and inability to pay dividends to shareholders.
At the 64th Annual General Meeting (AGM) of the Company in Lagos, Boniface bemoaned the yearly losses suffered by the company in its annual financial reports and payment of regulatory fees and other levies over infractions by the company.
Guinea Insurance Plc has consistently posted losses in its annual reports, recording N227.6 million and N23.5 million loss in full year 2020 and 2021 respectively. According to Boniface, the company’s consistent failure to pay dividends to shareholders does not encourage more investments from investors.
“A man that has been given birth to 64 years ago is not a small man, he is a grandpa. Mr. Chairman, here we are, year in, year out we come to this place if you look at the page convening this annual general meeting all items were listed but there is no item related to shareholders. Nothing was mentioned about dividends to shareholders,” he said.
“This is a shareholders meeting, you have your own board meeting Mr. Chairman, we don’t interfere in your deliberations for management to work out, but today, the management has failed by not providing the elusive dividends to shareholders of this company. A 64-years old man must fend for his family. So why are we not being fended for? A father that cannot fend for his children will not be called a good father”, Okezie lamented.
He requested a strategy to better the current situation at the company as he insisted that shareholders are entitled to dividends payouts. “Mr Chairman going forward, what are the plans to return us to profitability that will entitled us to dividends? We need thorough explanation, when will we be having dividends to all stakeholders?,” Boniface queried.
“You have over 18 million shareholders and thousands who have invested in this company including the big time shareholders or institutional, they are also entitled to dividends,” he added.
According to him, “somebody cannot be bringing his or her money to bail you out or to invest and he would not have the proceeds accrued to him. He can’t be happy with the board and management. If you are having return on investment you would be happy to put in more money in the business. If you run to him that the business is down and you need money, he would tell what did you do with the money he gave you before. He would not be happy to support you, that is the basic truth we mod tell ourselves.
Okezie also expressed concern about the interim dividend which many quoted companies are yet to declare, noting that shareholders were equally concerned that the payment has yet to commence.
MTN Nigeria Communications, Custodian and Allied Insurance, Guinness Nigeria and SEPLAT Energy have thus far declared their interim for the year but have yet to disburse the dividends to shareholders.
Seplat declared a dividend of N10.66 per share but payment date has yet to be announced; Guinness declared a dividend of N7.14, to be paid on October 26; MTN declared a dividend of N5.60 with payment date fixed for August 26; and Custodian has declared a dividend of 0.10k with payment date of September 1.
“We are pleased with it but that does not preclude others from doing the same,” Okezie said. “We also know that many of the quoted companies have yet to declare, maybe they are awaiting their board approval before making it public.”
According to him, declaring dividends is a good development to the investing public and to the capital market amidst the higher inflation rates and dwindling economy.
While applauding the performances of the quoted companies on the Nigerian Exchange Limited (NGX), Okezie knocked the attitude of the governments to the investing community.
He said, “We are grateful to them (the companies). It is not easy for companies in Nigeria because of the poor state of the Nigerian economy which is hitting hard on everybody
“If the government had been performing the way companies have been doing, Nigeria would have been better for all. They need to borrow a new leaf from these companies, be it our so-called government leaders.”
Meanwhile, the Nigerian stocks market gained N5.64 trillion in the first half of the year as the All-Share Index rose to 51,817.59 basis points on the last trading day in June from 42,716.44 basis points it opened in January this year.
Investors’ sentiment in the second quarter has been largely influenced by activities in the political circle, fixed income yields as well as company results and stock-specific events.
Following the Monetary Policy Committee’s decision in raising the interest rates to 13 per cent and subsequently to its current rate at 14 per cent, however, the mid-quarter had witnessed sell-offs of stocks by investors at the floor of the exchange.
“For appealing fixed income yields, institutional investors adjusted their portfolio and ASI declined the most in Q2 to 50,756.74 points on Monday 20th June, 2022,” the Branch Manager of Lead Capital Plc, Duniya Daniel, said at a recent webinar, themed ‘Interim Dividend – An Equity Gold Mine’.
Daniel noted that on the strength of the strong first quarter performance, H1’22/Q2’22 earnings performance was impressive.
Meanwhile, major tier-1 banks are yet to publish their half-year results, these include the likes of Zenith Bank, Access Holdings, United Bank for Africa and Guaranty Trust Holding Company.
“Price hikes and improved top-line performances were brought on by operating cost inflationary pressures. However, we observed weak bottom line growth, which was fueled by high operational costs, increased borrowings, and excessive interest costs.
“Due to ongoing political uncertainty and security concerns, investors continued to trade carefully,” the Lead Capital branch manager added.
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