1.Q: In 2017, the total amount of cash dividend distributed by listed companies hit a record high. Can you brief about the basic cash dividend situations of SZSE-listed companies? And what’s different from those in previous years?
A: More than 2,100 SZSE-listed companies have disclosed their 2017 annual reports so far. Among them, 1,620 companies, accounting for 77%, have cash dividend distribution plans, with the distribution amount totaling more than CNY220 billion, up by 17% from that in the last year and setting a record high. Among them, a number of companies have continued to devote great efforts to distribute cash dividends, playing a good exemplary role. For instance, VANKE has paid cash dividends every year since its listing in 1991. Its cumulative dividend amount has reached CNY41.21 billion, accounting for more than 25% of its cumulative net profit realized. The cumulative cash dividends of Midea Group have exceeded CNY33 billion, far more than its cumulative financing amount of approximately CNY9.6 billion since its listing. NHU has distributed cash dividends for 14 consecutive years since its listing in 2004, with its cumulative cash dividend surpassing CNY4.5 billion and its average cash dividend ratio over the years exceeding 40%. The companies that have been paying dividends every year since listing include HIKVISION, BY-HEALTH, Inovance Technology, Sino Wealth Electronic and Jingsheng M&E etc. The SZSE-listed companies’ cash dividends in 2017 are of the following characteristics:
The first is the enhancement of dividend continuity and stability. Continuous and stable cash dividends are often seen as an important signal for the stability of financial and operating conditions of listed companies. In the past three years, there were 267 companies with a cash dividend ratio of over 30% (up 13% compared to 237 companies for the previous three years), while 69 companies with a ratio of over 50% (up 25% compared to 55 companies for the previous three years).
The second is that there are more companies paying higher cash dividends. Adequate liquidity is the foundation of high-dividend companies. 699 companies had a cash dividend ratio of over 30% in 2017 (up 9% compared to 643 companies in 2016), 322 companies with a ratio of over 50% (up 13% compared to 285 companies in 2016) and 110 companies with a ratio of over 80% (up 8% compared to 102 companies in 2016).
The third is the improvement of the dividend rate situation. High dividend yield is an important factor in attracting long-term investors. Based on the closing price on 31 December 2017, there were 150 SZSE-listed companies with a dividend payout ratio of over 2% in 2017, which is 1.5 times higher than the 98 companies in 2016. The average dividend yield of traditional industries such as coal, iron and steel, water production and supply, which directly benefit from the supply-side structural reform, ranks among the top of various industries. The sincerity of SZSE-listed companies to repay investors with real money is even more remarkable.
The fourth is that SMEs and ChiNext companies maintained strong desire to distribute dividends. There were 295 Main Board companies, 712 SME Board companies and 613 ChiNext Board companies who paid cash dividends in 2017, accounting for 62%, 79% and 86% of the total companies in respective boards. The proportion of dividend-paying SMEs to the board total has maintained at over 75% since the SME Board establishment and that for the ChiNext Board is 85%, resulting in continuous higher proportion than the market average.
2. Q: What measures have been taken by SZSE to promote the cash dividends of listed companies? What has been achieved?
A: Cash dividend is one of the main ways for listed companies’ investors to obtain returns. It is also an important way to cultivate investors’ long-term investment concept and enhance the attractiveness of the capital market. In 2013, CSRC issued the Guidelines No. 3 on the Supervision and Administration of Listed Companies – Cash Dividend Distribution of Listed Companies to further enhance the transparency of cash dividends and protect the legitimate rights and interests of investors. In 2015, CSRC, Ministry of Finance, SASAC and CBRC jointly issued the Circular on Encouraging the Mergers and Reorganizations, Cash Dividend Distribution and Share Repurchases of Listed Companies to encourage cash dividend distribution by listed companies. Meanwhile, SZSE has actively implemented the measures of CSRC, relevant ministries and commissions. SZSE encourages and guides the cash dividend distribution of listed companies in the Guidelines for the Standard Operation of Listed Companies so as to strengthen the awareness of listed companies in repaying shareholders. In order to further guide listed companies in establishing a sound cash dividend system and regulate their disclosure of relevant information, SZSE is actively researching and formulating the Guidelines for the Disclosure of Cash Dividend Distribution Information.
Under the guidance of CSRC, SZSE has strengthened system development and information disclosure supervision. Also, SZSE has actively guided, promoted and supported the cash dividend distribution of listed companies through multiple measures and multiple channels, with positive results delivered. First, a good atmosphere of sharing dividends has basically taken shape. Since 2011, the number of dividend-paying companies in SZSE has remained above 70%, and the average cash dividend ratio has remained above 30%. The total amount of dividends has increased steadily year by year, and more and more companies continue to distribute dividends. Second, the transparency and stability of the dividend policy of listed companies have been continuously enhanced. Up to now, most of the companies in SZSE have clearly established a differentiated dividend mechanism in their articles of association to convey a stable and continuous dividend forecast to the market, promoting the corporate governance. Third, listed companies’ shareholding structure has been constantly optimized, and companies that continue to maintain stable dividends have attracted “advocacy” from a group of institutional investors, laying the foundation for corporate internationalization.
3. Q: The market pays close attention to the phenomena of “cheapskates” and high-ratio bonus issue and stock dividend distribution. What is SZSE’s take on these?
A: For a long time, SZSE has included the improvement of cash dividend distribution system of listed companies into the important scope of the market’s basic institutional construction. SZSE actively supports, promotes, and guides listed companies to give out cash dividends and strengthen their sense of return. At present, there are still a few listed companies that do not pay dividends for many years. The reason is that some companies are unable to pay dividends due to poor performance, tight cash flow, and poor continuing operations. And some have the ability to share dividends but they are not willing to do so. In this regard, SZSE implements the principle of “one company, one policy” and focuses on information disclosure to further strengthen dividend supervision. Moreover, having done the post-review of annual report, we’ve sent out letters of inquiries to more than 20 companies that do not pay dividends without full information disclosure and that launch plans of high-ratio bonus issue and stock dividend distribution but do not offer cash dividends. These companies are asked to explain the reasons with the consideration of their development stage, industry characteristics and funding requirements. We review the rationality and promote the companies to value the information disclosure of cash dividends, thus continuously improving the quality of listed companies to repay investors. Through supervision, the “cheapskates” phenomenon has improved noticeably. Some “cheapskates” that have not paid out dividends for a long time or have a low dividend ratio have already launched the 2017 annual cash distribution plan. Among the 37 companies that were able to pay dividends and did not pay dividends during the years of 2014-2016, 14 companies have introduced a dividend scheme in 2017, with an average dividend ratio of more than 60%. For example, for a company that is able to pay dividends but does not pay for 10 consecutive years, SZSE issued a letter of concern to urge the company to increase its awareness of dividend distribution. As a result, the company immediately revised the original zero-dividend-distribution plan and introduced cash dividends.
Furthermore, SZSE continues to put high pressure on the high-ratio bonus issue and stock dividend distribution of listed companies. Through improving rules, strengthening supervision, strengthening investor education, and preventing concept hype, we continue to purify the capital market ecological environment. Under strict regulatory conditions, the rationality and necessity of such high-ratio non-cash dividend distribution must be questioned and checked one by one. Against this background, the number of companies that introduce high-ratio bonus issue and stock dividends has decreased significantly from the 256 units in 2015 to the 147 units in 2016, and further decreased to the 48 units in 2017. The market tends to view the listed companies of this high-ratio features more rationally, with the average increase being only about 1% in the next trading day after the disclosure. At present, the public solicitation of opinions for SZSE’s guidelines on the information disclosure of high-ratio bonus issue and stock dividend distribution has ended. We will released the guidelines after further improvement to further regulate the high-ratio non-cash dividend distribution behavior.
Next, SZSE will follow the unified deployment of CSRC to strictly fulfill its front-line supervision duty and constantly push forward and regulate the cash dividend distribution by listed companies. Through a market transmission mechanism, SZSE will optimize the resources allocation of capital market to achieve win-win among listed companies, investors and all market players.
