Securities regulator raises refinancing threshold
(Xinhua)
Updated: 2008-10-10 09:50
China's securities regulator on Thursday said publicly-traded companies must pay dividends in cash rather than stock over three years before submitting their refinancing applications.
The move could help to encourage long-term investment and reduce market volatility, the China Securities Regulatory Commission (CSRC) said.
The benchmark Shanghai Composite Index has plunged 66 percent from its record high last October.
In a new regulation stipulating cash dividend payment by listed companies, the CSRC said: "The listed firms, if applying for refinancing, must pay dividends in cash totaling no less than 30 percent of its distributed profits over the past three years."
The regulation went into effect on Thursday.
In the draft version released in August, companies were allowed to pay dividends either in cash or stock.
The listed firms were also ordered to reveal their cash dividend policies and previous cash dividend data to investors in their annual reports to improve transparency.
"The listed company should give reasons why it failed to pay a cash dividend if it is able to and where the money goes," according to the rule.
Cash dividends could offer stable investment returns and prompt large institutional investors to reduce speculation on the secondary market, the regulator said.
A couple of huge refinancing plans earlier this year triggered a market plunge on concerns over stake dilution and liquidity stress.
In a separate regulation on share buy-back, also effective on Thursday, the CSRC said it allowed a cash dividend payment when the controlling shareholders bought stocks on the secondary market.
Such action was banned in the draft version released in late September to solicit public opinion.
Share buy-back through bidding at stock exchanges also no longer needs regulatory approval.
The CSRC added it would continue to revise the rules on stock buy-back and also give consideration to repurchase through agreement or tender offer.
http://www.chinadaily.com.cn/bizchina/2008-10/10/content_7094132.htm
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Investors cheer as some firms retain dividends
Reuters in Chicago
Updated on Oct 11, 2008
Businesses generally do not get a lot of credit from investors when they maintain or even raise their dividends - but that was before the current financial crisis hit and forced many companies to cut or suspend those payouts to preserve cash.
So it was heartening news when Caterpillar on Wednesday said shareholders could still count on its quarterly dividend and United Technologies Corp raised its payout.
The moves - indications that two of the leading United States industrial companies are not hoarding their cash - amounted to a rare declaration of corporate optimism during a downturn that many are calling the worst financial crisis since the Depression.
"It's a much-needed confidence booster in a tough environment," Edward Jones analyst Matt Collins said. "The only thing nicer would be to see more executives personally buying their own stock."
Caterpillar declared a quarterly dividend of 42 US cents a share, the latest in an unbroken series that began way back in November 1933 - in the middle of the last worldwide economic downturn.
The world's largest maker of construction and mining equipment - and one of the few US companies to successfully tap the credit markets in recent weeks - said the payment was yet another sign of its financial health and its ability to weather the current economic gales.
"Since paying that first dividend [75 years] ago ... Caterpillar has faced many challenging economic circumstances, including those facing the global economy today," said Jim Owens, the chief executive of the company.
For manufacturing conglomerate United Technologies, which raised its dividend to 38.5 US cents per share, the payout was the latest in a series that began in 1936.
Chief executive Louis Chenevert said the payment "reflects our confidence in sustained earnings growth" despite "today's tough economic environment".
In recent days, a number of leading firms, including financial services leader Bank of America and homebuilder Lennar Corp, have done just the opposite, slashing their dividends as they race to conserve cash amid the credit markets' seizure.
In all, 25 Standard & Poor's 500 members have cut or suspended their dividends so far this year - a move that most executives try to avoid because of the message it sends.
"I think that companies get to the point of cutting dividends when they're under financial stress or if they believe in this environment they don't need to pay out quite as much," said Dan Genter, the chief executive of RNC Capital Management.
"If we feel there is a high risk of a dividend cut, we'll get out of that company," he said.
Standard & Poor's senior index analyst Howard Silverblatt said in the financial sector alone, 21 companies had either cut or suspended their dividends this year, costing their shareholders US$30.4 billion in all.
Based on already announced cuts, this quarter will be the first since the second quarter of 2003 that US shareholders will see an overall dividend decrease.
At this point, it looked to be a single-digit percentage fall in total dollars paid out to shareholders. But a double-digit dip - the first since 1958 - was possible, Mr Silverblatt said.
"The fourth quarter's going to be difficult. Next year's going to be difficult," he said.
Ingalls & Snyder analyst Alex Blanton said Caterpillar shareholders might face some disappointments of their own in the new year - although he did not think it would come in the form of a dividend cut.
Since May, shares in the firm have fallen almost 50 per cent on concerns about its prospects if the world tips into a major downturn.
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