Listed companies’ benefit transmission and insider trading have become the focus of surveillance
As an important way for listed companies to reward shareholders, with the disclosure of the 2022 annual report, the dividend plans of many listed companies have “surfaced.”
The latest data shows that the amount of cash dividends in the annual report of A-share companies in 2022 will hit a record high in the year, and the total cash dividends will reach 1.89 trillion yuan. But at the same time, a reporter from the “Economic Information Daily” found that many listed companies still insisted on large-scale and high-proportion cash dividends despite the decline in performance, and therefore received letters of concern from the exchange.
Experts pointed out that dividends show the profitability and strength of the company, but a high proportion of short-term dividends does not necessarily mean that the competitiveness and value of listed companies have increased. There may be behaviors such as benefit transfer or market manipulation behind it, so manipulative behavior must be prevented. dividends.
Many companies received letters of concern from exchanges due to dividend plans
With the end of the 2022 annual report disclosure period, the “transcript” of A-share companies returning to investors will also be announced.
According to the latest “2022 Business Performance Analysis Report of Chinese Listed Companies” released by the China Association of Listed Companies, the amount of cash dividends in the 2022 annual report of A-share companies has hit a historical high, and actively rewarding investors has become a new trend in the market. 3,413 listed companies implemented or announced annual cash dividend plans, accounting for 67%, with a total cash dividend of 1.89 trillion yuan and an average dividend payment rate of 30.3%. The dividends of 27 companies exceeded 10 billion yuan, and the dividends of Industrial and Commercial Bank of China exceeded 100 billion yuan.
But at the same time, the reporter noticed that many listed companies have received regulatory attention after disclosing their dividend plans.
On the morning of May 4, Tongdahai received a letter of concern from the Shenzhen Stock Exchange. The letter of concern shows that on April 26, the company disclosed the “Announcement on the Company’s 2022 Annual Profit Distribution and Capitalization of Capital Reserve Plan”, and plans to distribute a cash bonus of 10 yuan (tax included) to all shareholders of the company for every 10 shares. Bonus shares, at the same time, the capital reserve is converted into share capital, and every 10 shares are converted into 5 shares. In this regard, the Shenzhen Stock Exchange requires Tongdahai to combine its industry characteristics, competition status, company development stage, business model, future development strategy, and the changes and sustainability of major financial indicators such as net profit and net assets in the last two years, etc. Explain in detail the main considerations, determination basis and rationality of the plan for profit distribution and conversion of capital reserves into share capital, whether it matches the company’s performance growth and development plan, and whether the conversion and dividend ratio match the company’s performance growth rate. At the same time, the Shenzhen Stock Exchange also requires the company to explain the specific process of formulating the plan, and conduct self-examination for information leakage and insider trading.
Not only Tongdahai, the reporter noticed that recently, a number of companies have received letters of concern from exchanges due to their dividend plans. For example, on April 28, companies such as Benli Technology, Shenzhen Ruijie, Chenxi Aviation, and Deer Laser were issued a letter of concern by the exchange. The main content of the exchange’s attention was related to the company’s previously released dividend plan; , Zhite New Materials, Platinum New Materials, Maiwei, Xiling Power, Kabeiyi and other companies received a letter of concern from the exchange due to the cash dividend plan. According to the reporter’s incomplete statistics, in the last week of April alone, more than 20 listed companies were issued letters of concern by the exchange due to dividend plans.
Supervision focuses on profit transfer and insider trading
The reporter combed through the letters of concern received by the above-mentioned listed companies and found that many companies still insisted on large-scale and high-proportion cash dividends despite the decline in performance, and many companies experienced stock price increases after announcing dividend plans. In this regard, the regulators repeatedly questioned whether the dividend (plan) plan matches the performance growth, and paid close attention to whether there were any situations such as profit transmission, insider trading, and stock price manipulation.
The reporter noticed that many companies, including Tongdahai, Shenzhen Ruijie, etc., will see a decline in net profit in 2022, but they all insist on generous dividends, and the company’s stock price has risen to varying degrees after the announcement of the dividend plan.
Shenzhen Ruijie will achieve revenue of 572 million yuan in 2022, a year-on-year decrease of 26.52%. The net profit attributable to the parent company is 15.6785 million yuan, a year-on-year decrease of 86.84%. All shareholders will transfer 5 shares for every 10 shares; Tongdahai will achieve a net profit of 87.3794 million yuan attributable to the parent company in 2022, a year-on-year decrease of 9.86%. The company plans to distribute a cash dividend of 10 yuan (including tax) to all shareholders of the company for every 10 shares 46 million yuan, accounting for more than 50% of the net profit of the year; Meirui New Materials will achieve a net profit of 111 million yuan in 2022, a year-on-year decrease of 7.12%. The company plans to distribute a cash dividend of 1.00 yuan (including tax) to all shareholders for every 10 shares. The amount of cash distributed reached 20 million yuan, and at the same time, the capital reserve was transferred to all shareholders for every 10 shares to increase 5 shares.
The 2022 annual profit distribution plan disclosed by Tongli Technology on April 24 shows that it plans to distribute a cash dividend of 10 yuan (including tax) to all shareholders for every 10 shares based on the total share capital of 68 million shares on December 31, 2022. 6 shares will be transferred for every 10 shares. In terms of performance, the company’s net profit attributable to shareholders of listed companies before and after deducting non-recurring gains and losses in 2022 increased by 6.86% year-on-year and decreased by 1.79% respectively. But it is worth noting that after the release of the dividend plan, the company’s share price has risen for five consecutive trading days since April 25.
For these listed companies, the exchange requires them to explain the basis for determining the profit distribution ratio in combination with the company’s financial status such as net profit and net assets, as well as the characteristics of the company’s industry, competition conditions, its own development stage, business model, and future development strategy. Reasonability, whether it matches the company’s performance growth and long-term shareholder return plan, and at the same time verify whether there are information leaks, insider trading, and stock price speculation.
The reporter noticed that many companies have already responded to the letter of concern from the exchange. These companies all said in the same way that the board of directors of the company combined the company’s performance in recent years based on the requirements of relevant laws, regulations and the company’s articles of association. The profit distribution plan has been formulated on the premise of not affecting the sustainable development of the company. At the same time, the company implements a positive profit distribution policy to give back to investors, allowing investors to participate in sharing the company’s operating results and establishing a good market image. This plan of profit distribution and conversion of capital reserves into share capital is conducive to enhancing the company’s market competitiveness, and is also conducive to the company’s faster and better realization of its long-term development strategy.
Experts warn against manipulative dividends
Industry experts said that as an important way to reward shareholders, dividends of listed companies are undoubtedly worthy of affirmation and encouragement. But at the same time, we must also be alert to the problems behind the dividends and prevent manipulative dividends.
“Dividends of listed companies are a necessary return to investors and an important basis for market value investment ecology. Generally speaking, A-share listed companies can attach importance to dividends and actively return investors. The amount of cash dividends in the 2022 annual report hits a record high in history.” Tian Lihui, dean of the Financial Development Research Institute of Nankai University, said, “However, it is necessary to prevent sports and manipulative dividends, and form a long-term stable dividend ratio based on the company’s value and development stage, so as to promote rather than affect the normal development of the company.” He believes Therefore, the regulators not only pay attention to whether the company will pay dividends this year and the specific scale, but also pay attention to the company’s dividend ratio and long-term dividend policy.
Fu Lichun, an economist and founding partner of Yuntai Capital, told reporters that cash dividends are actually an important part of the overall strategy of listed companies, and should be quite continuous and systematic. But it does not mean that the higher the dividend ratio, the better. In the long run, inappropriate dividends will damage the interests of investors. For listed companies, how to plan and implement dividends is a very important project. Listed companies should carry out healthy and continuous dividends based on the company’s long-term sustainable growth and development. Investors should also reasonably screen and conduct rational valuations when investing.
Tian Lihui also said that for investors, dividends show the profitability and strength of the company, but to prevent manipulative dividends, it is necessary to observe the company’s long-term dividend behavior. “A high proportion of short-term dividends does not necessarily mean an increase in the competitiveness and value of listed companies, but there may be behaviors such as benefit transmission or market manipulation. What investors need is a high proportion of long-term dividends, which are based on and rely on the company’s long-term growth in value.”