Dividend payouts of listed firms to surge this year

Companies listed on the mainland stock exchanges are likely to offer more cash dividends to investors this year to further bolster market confidence and encourage longterm value investing, experts said.

By Thursday, 276 A-share listed firms had announced or made cash dividends to investors using the annual earnings for 2019, with each share earning a dividend of roughly 0.25 yuan (3.5 cents) on average, according to Wind Info.

“It is highly probable that this year’s cash dividends will grow from a year earlier,” said Tan Yunhui, a strategist with Yuekai Securities.

About 68 percent of the A-share listed companies used the annual earnings of 2018 to pay cash dividends last year, while the proportion is set to markedly rise this year, Tan said, adding that the rise would be attributable to rule-based capital market reforms and policy efforts for stabilizing market expectations.

The National Development and Reform Commission, the nation’s top economic regulator, announced measures earlier this month to boost residents’ property income, including stricter punishments for dividend payout violations.

The new Securities Law, which took effect on March 1, also stipulates that listed firms should specify the arrangements about cash dividend payments in the articles of association and make payments accordingly.

Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, said the amendments were necessary as some of the listed blue-chip companies wanted to reserve profits for business expansion, rather than for dividend payouts.

“Boosting the willingness of listed firms to pay cash dividends is essential for long-term value investment,” Dong said.

As more listed firms pay decent and steady cash dividends, investors will be more inclined to hold shares of the companies for a longer period, instead of chasing capital gains via short-term speculative trading, he said.

Dong urged mainland listed firms to shift from annual dividend payouts to seasonal payouts as it would be fairer to investors, reduce speculation during earnings season and help the A-share market catch up with practices in mature markets.

Higher cash dividends will also help stabilize investors’ expectation of investment returns and boost market confidence, helping the market maintain ample liquidity during global financial turmoil, Tan said.

Shares with higher dividend payouts and solid fundamentals will provide investors with a safe alternative to weather the current market fluctuations, Tan said.

Listed firms on the A-share market have paid more dividends in recent years, with cash dividend payments for the whole market growing by 17.86 percent on a yearly basis in 2017, 17.81 percent in 2018 and by 6.49 percent to 1.22 trillion yuan in total in 2019, according to data compiled by Securities Daily.

Promoting long-term investment is one of the priorities of China’s capital market reforms. On Wednesday, the China Banking and Insurance Regulatory Commission launched new rules on insurance asset management products, partly to encourage insurers to inject long-term funds into the capital market.

Taking effect from May 1, the regulations enlarge the scope of distribution channels and qualified investors in insurance asset management products, and streamline the product issuance procedures.