Carlsberg Brewery Malaysia Bhd's latest announcement of a generous dividend is a trend that is likely to be emulated by Malaysian companies.
A day after it was announced that the company was paying a final and special dividend grossing 65 sen per share, the stock rose 40 sen or 4% higher to close at RM10.40 yesterday.
The higher-than-expected dividends, payable on May 23, would yield a net return of 6.1% at Carlsberg's current share price level.
The total gross dividends for the year of 75 sen (inclusive of an interim 10 sen) equalled Calsberg's total payout for last year.
Online investment advisory Surf88.com, in a commentary after the announcement, said while the operating environment remained challenging for the current year, Carlsberg's ability to pay above market dividends was very much intact, given its RM263mil cash reserves.
Like Carlsberg, other foreign multinational companies also have long adopted high-dividend payout policies.
Global companies like British American Tobacco Bhd, Amway Malaysia Holdings Bhd, Guinness Anchor Bhd and Nestle (M) Bhd have already established themselves as generous paymasters over the years, consistently returning more than 50% of their profits to shareholders.
Moreover, the October to December financial reporting season also saw several major local companies making their way into the ranks of high dividend paying stocks.
The most significant was Malayan Banking Bhd, which declared a massive 600% rise in dividend payout for the first six months ended Dec 31, 2002.
Other companies showed similar willingness to reward loyal shareholders.
IOI Corp Bhd, UAC Bhd, Highlands and Lowlands Bhd, and Golden Hope Plantations Bhd also declared dividend returns that were higher than what can be made from bank deposits.
In his speech at the KLSE corporate awards 2002 recently, acting Prime Minister Datuk Seri Abdullah Ahmad Badawi had called on Malaysian companies to adopt a more attractive dividend policy in order to woo investors.
Analysts said an investment with dividend return of 5% and more was considered an attractive option.
Previously local companies were more likely to spend on share buybacks to enhance the share value.
However, the recent reporting season saw a trend emerging where local companies had opted to directly reward their shareholders through cash dividend payments,'' MIDF-Sisma Securities economist Azrul Azwar said.
While saying it was too early to tell whether the trend was sustainable, Azrul said a more consistent policy of returning excess funds to shareholders would make the companies more appealing to longer term shareholders, both local and foreign.
Another analyst with a local stockbroking firm concurred, saying these companies need to maintain healthy growth, both in terms of profits and dividends, to appeal more to long-term investors.
Surf88.com said investors generally invested for capital gains rather than dividend returns, but amid the prevailing market conditions, dividends offered defensive gains.
Reasonable fundamentals would ensure potential for capital upside with a revival in the stock market,'' it said.
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