"Active Return to Investors" series of articles - cash dividends
Risk revealing educational articles
How do investors view the cash dividend commitment of listed companies
[Editor's note] Investors are important participants in the capital market, and actively returning investors is the foundation of the capital market. In order to let investors fully understand the situation of listed companies, boost confidence in the capital market, and continue to create a good public opinion atmosphere of rational investment, value investment and long-term investment, this column will focus on listed companies with strong and focused attention from investors since this issue. Hot issues such as dividends and returns, and a series of promotional articles were published in separate topics, and investors are expected to pay close attention.
Attentive investors will find that since May this year, many listed companies have added profit distribution content to the revised company charter and issued the “Shareholders' Return Plan for the next three years”. The company will make a future cash dividend by public commitment. The principles and plans are disclosed to investors. In fact, since December 2011, the above contents have appeared in the “Prospectus” of the newly listed company. As an investor, how do you view these commitments? How to understand the meaning behind these commitments? What do these dividend commitments bring to investment decisions?
Why should the cash dividends of listed companies continue to be stable?
In developed markets in Europe and the United States, there are a number of listed companies that have consistently maintained stable cash dividends for many years. For example, GE's continued high-level dividends in the United States for more than one hundred years, and HSBC's long-term high-level dividends in Hong Kong's stock market continued to pay dividends. Such behavior gives investors two clear expectations: First, investors can guess in advance which stock to invest in cash dividends; second, investors have a rough estimate of how much cash dividends will be available each year in the future. These two expectations are very important for a stable investor seeking stable returns, because through these two stable expectations, investors can establish a reasonable investment plan and decide: 1. Which stock can be expected to achieve cash return investment Goal; 2. At what price to buy an investment target that can achieve the expected return on dividends; 3. How long to hold the investment target that can achieve the plan.
In China, the cash dividends of most listed companies are: one year, one year, or one yuan per share this year. Investors often face two questions: First, they don't know which listed company will make cash dividends; second, even if they know that the company has discovered gold dividends, they don't know how much it will cost. Investors can only wait for a listed company to know its dividend plan when it publishes its annual report (some in the interim report), so it is often at a loss to know how to choose the investment target. Under this circumstance, the majority of investors are chasing capital gains, stable investors cannot cultivate, and new long-term funds cannot be introduced into the market. Therefore, investors' expectations for the continued stable cash dividends of listed companies are of great significance for the introduction of new long-term funds for A-shares and individual financial planning for investors.
How to make investors have stable expectations?
Since December 2011, the CSRC has begun to urge new listed companies to disclose the contents of the company's articles of association regarding cash dividends in the prospectus. The most important thing is that the minimum conditions for the cash dividends of listed companies and the minimum proportion of cash dividends in the articles of association. Content. In addition, we disclose the shareholder return plan for the next three years, and clarify the company's minimum cash dividend ratio for 2012-2014 when it meets the cash dividend requirement.
Taking a listed company as an example, the company was listed on December 20, 2011. The company disclosed the articles of association in the prospectus: “The net profit realized in the company’s year is positive and the accumulated undistributed profit of the company at the end of the year is positive. Under the company, the company must make a cash dividend, and the profit distributed in cash is not less than 10% of the distributable profit realized in the year.” and the future return plan “The profit of the company’s annual dividend distribution in 2012-2014 is not less than 20% of the distributable profits realized in the year, of which the annual profit distributed in cash is not less than 10% of the distributable profit realized in the year. The above two disclosures of the company are two commitments. The meaning of the commitment is: as long as the company is profitable in the current year and the amount of undistributed profit in the company's balance sheet is positive at the end of the year, the company must make a cash dividend, and the dividend ratio is not less than the available Distribute 10% of the profit. If investors have a general expectation of the company's profitability, such a commitment can make investors have a rough estimate of the company's cash dividend amount.
In May 2011, on the basis of standardizing new listed companies, the CSRC issued the “Notice on Further Implementing the Cash Dividends of Listed Companies”, requiring all listed companies to specify the decision-making mechanism and procedures for profit distribution in the articles of association, and determine the distribution. The minimum conditions for cash dividends, and urged listed companies to introduce shareholder return plans for the next three years to determine the minimum cash dividend ratio of the company from 2012 to 2014 when eligible for cash dividends. Since May, a large number of listed companies have revised the company's articles of association in accordance with the requirements of the CSRC, and have issued the “Shareholders' Return Plan for the Next Three Years”. In particular, some companies that have been profitable for more than three consecutive years, but have not made cash dividends, have also revised the company's articles of association and introduced the shareholder return plan for the next three years, preparing to return investors through stable, sustained and predictable cash dividends.
The Shenzhen Stock Exchange has always attached great importance to the listed companies in Shenzhen by rewarding shareholders with cash dividends. The system requires listed companies to improve the cash dividend decision-making mechanism and strengthen the information disclosure of cash dividend-related policies to help investors form a stable cash return expectation. During the disclosure of the 2011 annual report, the Shenzhen Stock Exchange requested the GEM listed companies to examine the relevant provisions of the company's articles of association regarding the profit distribution policy. If the company's articles of association do not have a form of profit distribution, specific conditions and proportions of cash dividends, and undistributed profits. If the specific policies such as the principle of use are clearly defined, the company's articles of association shall be revised and submitted to the 2011 Annual General Meeting for consideration at the latest. At the same time, GEM listed companies are required to disclose the formulation and implementation of the cash dividend policy in the 2011 annual report, including whether the dividend decision-making mechanism is complete, whether the conditions and procedures for adjusting the cash dividend policy are compliant and transparent. In the notice of the 2012 semi-annual report of the Shenzhen Stock Exchange, the above requirements were extended to all listed companies in Shenzhen, and the listed companies that required the undistributed profit at the end of 2011 to be positive but did not propose a cash dividend plan should disclose the relevant unallocated funds retention company. Information such as the use, whether the income has been generated, and the reason why the actual income does not match the expected return.
Are these commitments effective?
Seeing these promises, investors may have such questions, will listed companies speak and count? In terms of binding force, this commitment has been reviewed and approved by the company's board of directors and shareholders' meeting. The proposal to amend the company's articles of association is also a special resolution of the shareholders' meeting. It must be reviewed and approved by shareholders who have more than 2/3 of the voting rights. It is legally binding. . After publicly disclosing these commitments, market participants, including investors and regulators, will supervise the listed companies according to their commitments. In the future, the Shenzhen Stock Exchange will record the implementation of the above commitments into the integrity files of listed companies and disclose them to the public. This can form an effective constraint on listed companies and can change the problem of the randomness of cash dividends of listed companies in the past. The newly listed companies that had promised earlier were performing well and there was no violation of the promise. In the above example, a company distributed cash dividends of RMB 3 for every 10 shares in 2011, and allocated a total of 30 million yuan in cash dividends, accounting for more than 40% of the company's net profit in 2011.
The commitment of listed companies deserves investors' attention
The public commitment of the listed company will disclose the company's future dividend plan to investors, so that investors can understand the plan of the listed company's future cash dividends, forming a clear expectation, and investors can choose stocks according to their financial planning. In particular, some companies with low cash dividends and high cash dividends are particularly worthy of investors' attention. Because: on the one hand, high proportion and continuous dividends indicate that the company's performance is stable, the quality is good, and the ability to create cash flow is strong. On the other hand, high percentages of sustained cash dividends are also more likely to attract long-term investors to hold company stocks. Beginning in May 2005, China Securities Index Co., Ltd. issued the CSI Dividend Index. The CSI Dividend Index selected 100 stocks with high cash dividend yield, stable dividends, and certain scale and liquidity on the Shanghai and Shenzhen Stock Exchanges as samples. To reflect the overall situation and trend of high dividend stocks in the A-share market. Comparing the Shanghai Composite Index and the CSI Dividend Index since May 2005, it can be found that the excess positive return of the CSI Dividend Index is as high as 70%.
(Disclaimer: This column is only published for the purpose of investment education, does not constitute investment advice. Investors operate according to this, at their own risk. Shenzhen Stock Exchange strives to ensure accurate and reliable information in this column, but it is not accurate No guarantee of sexuality, completeness or timeliness, no liability for losses arising from the use of this column.)