Dividend policy in South Africa

Firer, Colin; Gilbert, Evan; Maytham, A

doi:10.1080/10293523.2008.11082500

Cited by 24 publications

(24 citation statements)

References 18 publications

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“…Limited research on the influence of dividend stability over time has been conducted on firms operating in South Africa. Firer, Gilbert and Maytham (2008) conducted a survey among South African firms, and found strong support for the fact that very often management implements conservative dividend policies in order to avoid dividend cuts in future. Bhana (1991;1997;1998) conducted a number of studies where an event-study methodology was applied to investigate the effect of announcements concerning dividend payments and changes in dividend payments.…”

Section: The Influence Of Dividend Levels and Dividend Stability On Share Returnsmentioning

confidence: 99%

The influence of dividend yield and dividend stability on share returns: Implications for dividend policy formulation

Erasmus

2013

J. econ. financ. sci.

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The relevance of the dividend decision has been a contentious issue in corporate finance research, partly due to contradictory views reported in existing literature. When faced with the dividend decision, management should understand its impact on shareholder value maximisation. This paper investigates the influence of the dividend decision on share returns for a sample of firms listed on the JSE from 1990 to 2010. Firms are allocated to portfolios based on dividend yield and dividend stability, and risk-adjusted abnormal returns for these portfolios are estimated. Results indicate that share returns were influenced not only by dividend payments levels, but also by the stability of these payments over time. The nature of a firm’s dividend decision could therefore have an effect on its share return. Although these results contribute to understanding the dividend characteristics that are relevant to investors, future research should investigate different types of dividend policies in order to assess specific investor preferences.

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Section: The Influence Of Dividend Levels and Dividend Stability On Share Returnsmentioning

confidence: 99%

The influence of dividend yield and dividend stability on share returns: Implications for dividend policy formulation

Erasmus

2013

J. econ. financ. sci.

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“…Should there be a question as to whether the surplus cash is going to be invested into value-creating investments or mismanaged by managers for their own gain, investors would prefer to have any surplus cash paid to them in the form of dividends. Dividends are preferable to having the surplus reinvested in the company at the manager's own discretion at the risk of potential mismanagement of funds (Erasmus 2013;Firer, Gilbert & Maytham 2008). Companies that follow this 'as and when' approach in the payout of surplus cash through dividends should be aware of the expectations and messages it creates for the investors (Erasmus 2013).…”

Section: Agency Theorymentioning

confidence: 99%

The role of dividend policy in share price volatility

Pelcher

2019

J. econ. financ. sci.

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Orientation: A key objective of a company is to maximise shareholder wealth. Distribution of created wealth is achieved either through reinvestment in the company, which increases share value, or through dividend payouts. This encapsulates the dividend policy of a company. In order to realise a cash return, the former requires an investor to liquidate part of the investment, while the latter provides an immediate cash return.Research purpose: The objective was to establish whether relationships exist between share price volatility and dividend policy for shares listed on the Johannesburg Stock Exchange Limited (JSE).Motivation for the study: Dividend policy is an important consideration in the wealth creation process, particularly whether or not to distribute dividends to shareholders. Dividend policy is often structured to cater for shareholders’ expectations.Research design, approach and method: Panel data analysis was employed on a sample of the top 40 JSE-listed shares from 2007 to 2016.Main findings: The results indicated that the association between share price volatility and dividend yield is positive and significant but that between share price volatility and payout ratio is insignificant.Practical/managerial implications: Dividends were proven to be relevant to shareholders and have an association with share price volatility.Contribution/value-add: Dividend policy for the top 40 companies listed on the JSE is a contributor to share price volatility. In order to minimise share price volatility, managers of dividend-paying companies should structure the dividend policy to have consistent dividend payments but also able to reinvest excess cash within the company.

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“…Taxes are however of secondary importance for management in the decision-making process of whether to increase dividends or to distribute excess cash in the form of share repurchases (Firer et al, 2008).…”

Section: Tax Issuesmentioning

confidence: 99%

“…Managers prefer avoiding to have to cut dividends and therefore increases in the dividend payout ratio are only considered after sufficient funds have been set aside for investment and liquidity requirements. The decision to repurchase shares will therefore only be considered once the investment and dividend decisions have been made (Firer, Gilbert & Maytham, 2008;Brav et al, 2005). Share repurchases are financed from temporary cash flows while dividends are paid from sustainable cash flows (Jagannathan et al, 2000).…”

Section: Why Use Share Repurchases?mentioning

confidence: 99%

Share repurchases in the South African mining sector

Vermeulen

2014

SAJBM

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The purpose of this study was to obtain an overview of the share repurchase activities of companies listed in the mining sector of the JSE, and to determine the extent to which detail information of these share repurchases are available on public data sources such as SENS (Securities Exchange News Service -the office of the JSE that distributes all relevant company information electronically). The study focused on a period of 11 years, from July 1999 until the 2010 financial year-end. The annual reports of a sample of companies were analysed to determine the number of shares, as well as the monetary value of the shares that were repurchased. The SENS announcements were then scrutinised to determine the number of share repurchases recorded in the annual reports that were announced to shareholders. From a total of 55 share repurchase transactions, only 23 transactions were announced on SENS. The repurchase transactions were then further analysed in terms of the method used (general or specific repurchase), the repurchasing entity (company, subsidiary or share trust) and the subsequent sale of treasury shares from the subsidiary to the holding company. It was concluded that the majority of share repurchases are announced. However, if only companies with primary listings on the JSE are considered, 60% of share repurchases are not announced. The use of the general and specific methods are more or less equal for companies with primary listings on the JSE, but for companies with secondary listings on the JSE, 98% of repurchases are general. Of the specific share repurchases of companies with primary listings about 46% are not announced, but of the general share repurchases about 77% are not announced. Since share repurchases made by companies with secondary listings on the JSE were significant in terms of numbers and value, it changed the total statistics substantially from what it would be if only companies with primary listing on the JSE were considered. Even though about 85% of total share repurchases are announced, studies on share repurchases cannot rely on SENS announcements only, since this would exclude a significant portion of the repurchase activities of companies with primary listings on the JSE (60%), and therefore lead to unreliable results.

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Dividend policy in South Africa

Cited by 24 publications

References 18 publications

The influence of dividend yield and dividend stability on share returns: Implications for dividend policy formulation

The influence of dividend yield and dividend stability on share returns: Implications for dividend policy formulation

The role of dividend policy in share price volatility

Share repurchases in the South African mining sector

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