CTBC Financial Holding Co (中信金控) yesterday said that it would issue all-cash dividends this year to curb profit dilution and prevent excessive capital growth.
The announcement marks the company’s first departure from its practice of issuing stock-and-cash dividends since 2009.
“We aim to maintain a dividend yield that is on par with last year, at between 4 percent and 5 percent, pending board approval,” CTBC Financial president Daniel Wu (吳一揆) said at an investors’ conference.
Stock dividends do not promise gains for all shareholders, as they cannot reap gains when the share price is unable to recover from its ex-dividend slump in the absence of significant growth catalysts, Wu said.
Due to worse-than-expected returns, the company has been scaling back and streamlining its new businesses, Wu said, adding that its subsidiary, CTBC Venture Capital, has reduced its capital by NT$1 billion, and has allocated it to its parent company to bolster its core businesses.
As profit growth slows across Taiwan’s financial sector, cash-only dividends are becoming the norm, Wu said, adding that foreign institutional investors have voiced their preference for cash payouts.
Last year, the company issued NT$1.61 in dividends per share, comprised of NT$0.81 in cash and NT$0.8 in stocks.
The company’s stocks, which gained 0.53 percent to NT$18.8 yesterday, would have a yield rate of 4.3 percent based on a NT$0.81 per share cash dividend payout, Wu said.
“Capital comes with costs and it must be used prudently,” Wu said, adding that he is hoping for the board to raise cash dividend payouts higher than last year’s amount.
Looking forward, Wu said that the company would seek to raise overseas profit contribution from 44 percent last year to 50 percent this year, driven by growth in China, Southeast Asia, Japan and North America.
The company is also expected to book 730 million baht (US$20.67 million) in profits from its acquisition of a 35.6 percent stake in Thailand’s LH Financial Group PLC in a NT$15.4 billion deal.
LH Financial Group last year reported net profits of about 2 billion baht, Wu said.
The deal, which has been approved by regulators and could be completed before the end of the third quarter this year, would allow CTBC Financial to book its take of the Thai company’s profits in the final quarter, Wu said.
Meanwhile, the company reported that net income last year dipped 17.3 percent annually to NT$27.93 billion. Earnings per share were NT$1.43.
The company’s profits would have posted a 2.3 percent annual gain if stripped of one-time setbacks, such as an additional NT$700 million in provisions for the company’s Tokyo-based banking subsidiary and NT$500 million in reparations caused by a botched tender offer deal, CTBC Financial said.
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