Cash Dividend: Real Gold And Silver "Red Envelope Rain" Stable Specification Is More Valuable

      As a basic way for listed companies to repay investors, cash dividend is an important source of stock intrinsic value, and also a necessary guarantee to enhance investors' long-term shareholding confidence. In recent years, with the continuous guidance of regulatory policies and the increasing awareness of corporate return to shareholders, the dividend level of listed companies has increased year by year. According to the implementation date statistics, from 2018 to 2020, the cash dividends of A-share listed companies are 1.15 trillion yuan, 1.2 trillion yuan and 1.4 trillion yuan respectively.

      Now it's the "red envelope season" for A-shares. More and more listed companies are investing in cash dividends, and investors are also happy. But the dividend is not simply "the more the better". How to achieve sustainable development in the process of giving back to shareholders and how to distribute according to laws and regulations?

Cash dividend "yizhengnong"

      The outbreak of Xinguan epidemic in 2020 will affect the normal operation of many listed companies. But most companies are still doing what they can, insisting on paying back investors. In 2020, the number of cash dividends of Shenzhen stock exchange companies accounted for more than 60% of the total number of companies; Cash Dividends account for more than 30% of net profit, roughly equivalent to that in 2019. Among them, there are a number of companies that continue to steadily return investors. For example, Midea Group and Weifu High Tech Co., Ltd. have maintained a stable proportion of dividend amount in net profit of more than 40% in recent three years, and Yanghe shares and Yunnan Baiyao have maintained above 60%.

Although some studies show that there is still a certain gap in the overall dividend level, dividend stability and sustainability between emerging markets and mature markets, more and more listed companies are participating in the tide of cash dividends. The atmosphere that A-share companies attach importance to dividends is gradually forming. This is mainly due to the following reasons:

      First, the performance of listed companies has been continuously improved. In the past two years, the compound growth rate of net profit of Shenzhen stock exchange company was 15.53%. Affected by the epidemic situation in 2020, the company began to return to work and production in an orderly manner in the second quarter. The company achieved a net profit of nearly 900 billion yuan, a year-on-year increase of 38.6%, which laid a good foundation for the company to continue to pay dividends.

    Second, the structure of investors has been gradually improved. China's capital market continues to open up to the outside world, the influx of capital from the North accelerates, and long-term domestic funds such as pension enter the market, which promotes the concept of value investment gradually popular.

    Third, the regulatory policy continued to guide. Since 2008, rules related to cash dividends have been continuously optimized. The State Council's opinions on further improving the quality of listed companies, which was issued last year, also encourages listed companies to repay investors through cash dividends and share repurchase. In March this year, the 14th five year plan and the outline of the long-term goal of 2035 once again emphasized the related contents of "improving the dividend system of listed companies". Regulatory policy guidance has become the "catalyst" for listed companies to form cash dividend culture.

"Hidden mystery" of large dividend

      It is a good thing for listed companies to repay investors with "real gold and silver", and high dividend scheme is favored by investors. However, if we can't grasp the dividend scale, the "local tyrant" and "family" dividend will be popular with investors for a while, but it will bring hidden dangers to itself.

For example, in 2017 and 2018, a listed company in the energy industry had a total dividend of 400 million yuan. However, in the past six years, except for the profit of 480 million yuan in 2017, the accumulated loss of 1.8 billion yuan in other years. It is rare that the profit of one year is closely followed by the distribution of almost all the profits. Excessive dividend leads to the decrease of the company's working capital, which is not conducive to the follow-up development. At present, the company's book undistributed profit balance has been negative.

This case gives a warning to the market that listed companies should be "tailored" and rational when paying dividends. However, the reporter noted that the dividend of some listed companies is not lack of reason, and may "hide another mystery".

        For example, some companies reduce the amount of dividends when the major shareholders do not need money. In order to meet the capital needs of large shareholders, they arrange a large proportion of dividends and regard listed companies as "cash dispensers".

On the one hand, some companies issued high cash dividends, on the other hand, large shareholders took the opportunity to reduce their holdings. In 2020, the performance of a listed company in a media industry only achieved a slight increase over the same period of the same period of the same period. However, it launched a distribution plan with a large force of 10 schools and 10 to 9, and disclosed the listing and circulation announcement of restricted shares at the same time. The exchange immediately issued a letter of concern, asking the company to explain the reasonableness of the profit distribution plan and whether to hype the share price through profit distribution and cooperate with shareholders to reduce their holdings.

      There are also companies "eat the bowl, look at the pot", while large dividends, while high financing. For example, a company's total dividend in 2018 and 2019 was about 2.9 billion yuan, accounting for 98% of the total net profit realized in two years, in which the major shareholders got more than 1.8 billion yuan in cash. In 2020, the company will turn to non-public offering and raise 6 billion yuan. While the company is short of money and wants to increase its fixed income, it also pays dividends to "its own people", which inevitably leads to doubts from the media and the market.

Profit distribution must have rules and regulations

        If you have a ruler in your heart, you can be measured. In order to standardize the profit distribution of listed companies, the regulatory authorities have successively issued or revised the guidelines on cash dividends, standardized operation guidelines and other normative documents in recent years, which put forward clear requirements for dividend distribution of listed companies. If the listed company should complete the profit distribution within two months after the proposal is approved by the general meeting of shareholders, the amount of distribution shall be subject to the upper limit of the distributable profits of the parent company. But some companies have not been able to "clear the days" or "clear the accounts.".

      In addition, there are some companies that regard dividend as a joke, before the dividend plan, and then cancel the announcement. For example, a listed company in the media industry held a shareholders' meeting in June 2018 to consider and approve the cash dividend scheme. At the end of the two-month distribution period, the company issued an announcement saying that the operating performance had dropped sharply, the cash flow was tight, and the fund needed for profit distribution had not been raised, so the company decided not to distribute it. In the face of this capricious behavior, investors will not buy, listed companies and related responsible persons have also been criticized by the Shenzhen Stock Exchange.

      It is worth mentioning that the cancellation of profit distribution or a microcosm of the company's operating conditions reflects that the company's ability to continue as a going concern is questionable. At the end of 2019, the company encountered investors voting with their feet and eventually went delisting.

      Cash dividends, as the basic means for listed companies to repay investors, is an important embodiment of respecting and protecting the rights and interests of investors. It helps to establish rational investment expectations, form a long-term investment concept in the capital market and stabilize the market environment.

      In the view of industry insiders, listed companies should balance the relationship between their own development and shareholders' returns, and maximize the overall interests of the company and shareholders through sustained and stable cash dividends. With the continuous improvement of corporate governance level, the promotion of value investment concept and the continuous guidance of regulatory policies, a positive virtuous circle will be built between the growth of listed companies and the return of investors.