Stakeholders urge market regulators to step up measures in ensuring that dividends are paid as and when due, UDEME EKWERE writes

The first thing that comes to the mind of an investor after he has staked his funds in the capital market is the expected return on investment.

An average investor looks forward to the time of the year when yields on his investments will begin to roll in, variously as gains (dividends), bonuses and capital appreciation. All these will translate into the profit that the investor expects to enjoy.

However, it is alarming to note that despite the excitement that follows the declaration of dividends by quoted companies on the Daily Official List, a huge part of such dividends remains unclaimed by investors yearly.

At the beginning of this year, the Securities and Exchange Commission put the total figure of unclaimed dividends for the end of the 2011 financial year at N41bn.

The then Director-General, SEC, Ms. Arunma Oteh, had noted that the amount represented a decline of N3bn, compared to N44bn recorded the previous year.

She had explained that SEC had been working round the clock to ensure that the amount of unclaimed dividends was reduced, adding that the issue was of great importance to the commission.

She said,, “The registrars have informed us that there is N41bn outstanding unpaid dividends and this marks a reduction from the N44bn of the previous year. Last week, we took on the registrars on a radical solution to the problem and we jointly considered a number of options.

“I can say that by the end of this quarter, the results will be felt; our target is that in 2012, we shall reduce the size of outstanding dividends by 50 per cent and we also aim to finally dispose of the operational and regulatory bottlenecks that have led to the accumulation of unpaid dividends.”

Recent figures rolling in from SEC show that the amount of unclaimed dividends now stands at N52.5bn.

Analysts say that various issues, especially inadequate investor education, is a major reason for the continuous increase in the amount of unclaimed dividends.

According to them, during the market boom, a lot of people, who might not have been well versed in the activities of the market were lured into the market as a result of the huge returns.

They note that such ‘investors’, comprising a large chunk of semi-literate people may not have been well-informed on the vagaries of investing in the market and may have been involved in buying shares blindly in the market, without giving proper information on how their returns could get to them.

According to them, it is important for SEC and the Nigerian Stock Exchange to take the issue of investor education, which it is embarking upon very seriously.

Shareholders, however, note that if these issues are judiciously pursued, it will go a long way to reducing the incidence of high unclaimed dividends.

They, however, note that apart from investor education, which is key to reducing this problem, the issue of late delivery of dividend warrants has to be properly dealt with, adding that this has also contributed to the high amounts.

For instance, the National President, Renaissance Shareholders’ Association of Nigeria, Mr. Olufemi Timothy, says that it is becoming increasingly common for shareholders to receive their warrants very late.

He says this is a problem that a lot of shareholders had to grapple with, because by the time the warrants would reach them, the six-month timeline to claim the amount on the warrants would have elapsed, thus posing more problems to them, and adding to the amounts of unclaimed dividends.

He says, “Someone, somewhere is not doing his job, and it is the shareholders that are suffering in this situation; it is not right. Our dividends are our right and anyone who invests in any business always expects and awaits the return; so, if we are denied our right, then it is perhaps the regulators who are not doing their jobs.

“The registrars may be the major culprits that delay these funds and I think the SEC has to step in to monitor these situations critically. We all know that the postal system used to be faulty, but for some time now, it has shown lots of improvement, so we believe the fault lies with some of these registrars.”

Agreeing with him, the President, Nigeria Shareholders Solidarity Association, Chief Timothy Adesiyan, says that the late delivery of dividend warrants to shareholders has also been contributing to the high amount of unclaimed dividends.

He says, “I do not know the reason why these things are happening, but it is true that some companies would declare dividends and it would take months before shareholders receive such dividends, in some cases, shareholders may wait for over a year without seeing anything.

“All these contribute to the high amount of unclaimed dividends and we believe that if the regulators institute all these options they have come up with, it would go a long way towards reducing the high rate of unclaimed dividends.”

The Managing Director, First Registrars Limited, Mr. Bayo Olugbemi, says that the issue of high unclaimed dividends is not one that can be pinned down on a particular person or institution.

He notes that most of the times, investors do not forward the correct address where they could be reached, which means that such dividends when sent out by registrars, are again returned to the companies.

“For a permanent solution, we have been encouraging shareholders to subscribe to or embrace the e-dividend payment solution which all registrars have put in place. It is a product through which dividends due are credited the same day to bank accounts vide electronic means and it is free,” he says.

In an apparent effort to further reduce the level of unclaimed dividends in the country, the Central Bank of Nigeria has said that it has plans to come up with a directive to ensure that shareholders get their dividends on time.

Specifically, the directive is aimed at ensuring that companies forward all declared dividends to registrars for onward transfer to shareholders soon after such amounts have been recommended.

This was contained in an exposure draft on the Guidelines for Securities Settlement in Nigeria, which was posted by the CBN on its website last week.

The move, according to analysts, if instituted, will also ensure that investors get returns on their investments on time.

According to the CBN, the directive will also ensure that such funds are remitted, latest, seven days after the annual general meetings.

The guidelines state that “Quoted companies shall make funds available to the registrar not later than seven working days after the AGM where the dividend was declared.”

The guidelines also note that the CBN is seeking to promote the electronic dividend policy of the capital market authorities, by ensuring that registrars paid dividends to investors electronically on the due date and should also advise the investors through any credit advice.

Source: Punch