"Active Return to Investors" Series of Articles - Introduction to Mature Market Dividends
Risk revealing educational articles
Cash dividends are one of the most common forms of dividends used by listed companies to return investors. In addition, stock dividends, stock splits, special dividends, and stock repurchases are all broad corporate dividend policies. The primary problem to be solved by the dividend policy is whether dividends are paid, and secondly, how much is issued and in what form. Such issues, domestic and foreign theoretical and practical circles have not had a unified conclusion, therefore, the "dividends of the dividend" has been popular for many years.
The domestic and international financial circles have formed a variety of genres in the dividend policy, but each genre has limited interpretation capabilities. At present, more representative are: dividend-free theory, "bird in hand" theory, tax difference theory, signal transmission theory, agency theory and irrational dividend policy theory. Dividend-free theory is the earliest theory of dividend policy. The main point is that company value has nothing to do with dividend policy. But the theory has a strict premise that is the assumption of a perfect capital market. With the gradual relaxation of the hypothesis, the "dividends irrelevant theory" is gradually replaced by the subsequent "dividend related theory", their main point is that the dividend policy will affect the company's value. Taking the agency theory as an example, the theory holds that the payment of cash dividends reduces the free cash flow that managers can control, reducing the extent to which they use this part of the funds for private investment or over-investment, thereby reducing shareholders and managers. Agency costs between. Since then, with the emergence of a large number of public opinion phenomena in the capital market, the irrational expectation of dividend policy theory that broke through the original rational expectation hypothesis has gradually emerged. In particular, dividends cater to theory, which combines behavioral, psychology, and sociology disciplines. It is believed that managers tend to cater to investors' needs when formulating dividend policies. When an investor prefers a dividend and provides a higher price for those stocks that pay dividends, the manager announces the payment of the dividend; otherwise, the dividend is stopped. Therefore, looking at the domestic and international theoretical circles, there is no dividend policy theory that can explain all dividends.
The practical experience of mature markets abroad also shows that a considerable number of markets (especially emerging markets) have used mandatory or semi-mandatory dividend policies to varying degrees in the development process. Among them, some emerging markets have experienced repetitions from mandatory to relaxed to mandatory dividends, while more markets have gradually changed from mandatory to semi-mandatory or to strengthen the system of decision-making procedures and information disclosure supervision.
Take the US market as an example. After more than three hundred years of development, it has formed a long-term stable cash dividend, and the non-stable share repurchase and special dividends supplemented by multiple dividends coexist and complement each other. system. The market has also formed a long-term investment philosophy based on the acquisition of stable cash dividends. This is not unrelated to the US dividend regulation policy. For example, the NYSE stipulates that the share of stock dividends should not exceed 25%. Otherwise, it is called stock splitting, and adopts completely different accounting treatments for stock splits and stock dividends. This greatly limits the impulse of high-speed transfer of listed companies in the United States.
Another example is Taiwan. As early as 2000, most Taiwan-listed companies tended to retain cash and preferred to distribute stock dividends. In 2000, Taiwan issued a "sound dividend policy", requiring listed companies to issue cash dividends and stock dividends at the same time without special reasons, and supplemented by enhanced dividend policy information disclosure to guide the listing of company companies to distribute dividends. In addition to requiring the listing company to disclose the dividend policy as required, it also formulated four dividend policy models (remaining dividend policy, stable dividend policy, fixed dividend policy, normal dividend plus additional dividend policy) for listing companies on their own The situation is selected. At the same time, it is stipulated that the total annual capital reserve and share capital increase shall not exceed 10% of the paid-up capital. The balanced dividend policy directly changed the practice of dividend policy for listed companies in Taiwan. The proportion of companies that distributed cash dividends increased rapidly from 49% in 2000 to 81% in 2009, and stock dividends showed a downward trend.
The dividend policy in Hong Kong is similar to that in the United States. The difference is that Chinese companies in the Hong Kong market will have a dual impact on the dividend policy of the Mainland and Hong Kong. In addition, the phenomenon of stock repurchases in the Hong Kong market is widespread, and the proportion of cash paid to shareholders through repurchase is almost the same as that of cash dividends. The main motivation for repurchasing shares is as an alternative to cash dividends, but since the repurchase does not dilute the value of each share, more and more companies use it as a management stock option plan and develop corresponding Stock options to motivate management. By repurchasing stocks to distribute profits to shareholders, and at the same time increasing the equity debt ratio of listed companies and optimizing the company's capital structure, it is very popular among listed companies with undervalued stock values.
Domestic and foreign theoretical and practical experience shows that the formulation of a healthy and reasonable dividend policy requires not only a combination of economics, finance, behavioral science, management science and other disciplines, but also comprehensive consideration of the development stage and actual operation of the capital market. Status, legal system and tax system. In view of the fact that China is in the market environment of “emerging and transitioning”, it is necessary to comprehensively consider various factors, learn from the experience of mature markets at home and abroad, learn from its successful and effective experiences, means and methods, and formulate a set of capital in line with China. The actual operating conditions of the market, a rational and orderly dividend system, and efforts to improve the various supporting systems.
(The information published in this article is for the sole purpose of investor education and does not constitute any investment advice. Investors should not substitute such information for their independent judgment or make decisions based solely on such information. The Shanghai Stock Exchange strives for this column. The information published is accurate and reliable, but does not guarantee the accuracy or completeness of such information, and does not assume any responsibility for the losses caused or likely to be caused by the use of such information. For more information, please visit the SSE Investor Education website http: //edu.sse.com.cn)