|Companies are encouraged to have a policy on payment of dividends and should communicate it to shareholders. Where dividends are not paid, companies should disclose their reasons.|
This Guideline encourages a company to have, and disclose, a dividend policy.
As investors, shareholders want to see returns on their investments. For many, dividends are a key part of these returns.
In addition, knowing what type and level of dividends they could expect in the future, may affect how investors plan their cash flow and view of the value of the company. In turn, this influences their investment decisions.
However, companies may be reluctant to have, or to disclose a dividend policy as they do not want to set expectations which they may be unable to meet. Instead, they want to have the flexibility of declaring dividends based on the actual performance of the company, and the circumstances of the day.
That said, a clear dividend policy could help stabilise the company’s share price. It could also ensure that the investors attracted to invest, or who have already invested, in the company are aligned with the dividend policy.
For this reason, companies are advised to have, and to disclose, a dividend policy.
It is also important that should dividends not be declared, the company should state its reasons, especially when it has the profits and cash flow to do so. It could, for instance, indicate that the funds are needed for reinvestment in the growth of the company, and indicate which of the areas the investments are likely to be in.
B. SGX Disclosure Guide
- If the Company is not paying any dividends for the financial year, please explain why.
C. Related Rules and Regulations
D. CG Guides
- Board Guide 7.2: Shareholders [Stakeholder Engagement].
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