Mar 2013 Financial News

J$5b dividend payout - Stock market investors reap cash ahead of new tax

Mar 06, 2013

Jamaican listed companies plan to issue more than J$5 billion in dividend payouts in the month of March prior to the new dividend tax, according to Wednesday Business calculations.

It will result in Government forgoing about J$500 million due to the lag effect of its announced tax rise, which becomes effective April 1.

The payouts, which start today, will be led off by Proven Investments Limited.

The list contains usual amounts from conglomerates but also dividends from companies which infrequently offer payouts, and also those raising the stakes.

Nineteen companies on the main and junior markets will payout dividends of J$5.37 billion within March alone. Distributions in January and February amounted to J$1.84 billion.

President & CEO of Stocks and Securities Limited, Mark Croskery, said that while March represents a usual payment period for stocks, the increased taxes factored in the rise.

"There are a plethora of boards paying dividends in anticipation of the tax on dividends," Croskery stated. "There is an increase in the frequency of the dividend payments announced."

Dyoll Group issued a wind-up dividend to shareholders worth some J$24 million. It also represents the first dividend in at least two years from the once dominant insurance group materially hurt by Hurricane Ivan payouts in early millennium. The stock has long been delisted.

The most generous distributions will be made by Carreras, J$1.26 billion; Scotia Group, J$1.24 billion; Sagicor Life Jamaica, J$714.59 million; and National Commercial Bank Jamaica, J$567.36 million.

Junior market companies will distribute a combined J$176 million, led by General Accident Insurance Company and Cargo Handlers Limited.

Cargo Handlers' planned payout of J$41.6 million on March 31 is up 212 per cent over the entire 12 months of 2012, and is also higher than the distributions made in 2011.

Government will raise the tax on dividends for Jamaican residents from five per cent to 15 per cent effective April 1.

Still, the majority of the dividends is bound for overseas owners of the most generous companies - for example, Carreras is owned over 50 per cent by British American Tobacco of the United Kingdom; Sagicor Life is owned at least 59 per cent by Barbados parent Sagicor Financial Corporation, while Scotia Group is owned 72 per cent by Scotiabank Canada.

GraceKennedy will pay out J$234 million, but Group CEO Don Wehby said the tax rise did not influence the decision. GK paid dividend amounting to J$670 million during calendar year 2012, according to Wednesday Business estimates.

Wehby said that GraceKennedy generally increases its dividend payouts over time, with annual payouts up some 30 per cent last year.

"GraceKennedy Limited has adopted a dividend policy intended to enhance the company's strategy for growth and to accelerate the creation of additional shareholder value," said Wehby via email.

"The dividend policy is to distribute at least 15 per cent of net profit attributable to stockholders. The policy must be viewed against the background of an unpredictable economy and is subject to available cash flow. The frequency of dividend payments is three times per year," he said.

In 2012, investors received roughly J$32 billion - a monthly average of J$2.6 billion - in dividends from locally listed companies, or 45 per cent more than year earlier levels, even excluding the lump sum from the Lascelles deMercado buyout, according to Wednesday Business calculations.

The rise in dividends balanced the 3.4 per cent and 15.6 per cent index fall on the main and junior markets, respectively.


Source:
Steven Jackson, Business Reporter
steven.jackson@gleanerjm.com
Jamaica Gleaner
Wednesday March 6, 2013

http://jamaica-gleaner.com/gleaner/20130306/business/business1.html