Fewer companies pay dividends in cash

The number of companies on the Stock Exchange which choose to disburse dividends in cash to their shareholders is decreasing every year, with analysts predicting the trend will continue, given that companies are increasingly in greater need of funding in order to sustain their growth.
At the same time, yields derived from dividends are also seeing a downward trend, so the companies’ management is no longer pressured to pay out in cash.
Last year, only 18 of the companies listed on the Stock Exchange disbursed dividends from their profit of the previous year, as compared with 21 companies in 2005 (from the profit for 2004), 25 in 2004 (from the profit for 2003) and 27 in 2003 (from the profit for 2002), according to a financial analysis conducted by the Intercapital Invest brokerage company. The average yields offered by these dividends, compared with the price of shares stood at a mere 1.44%, compared with 2.57% in 2005 and 16% in 2004.
Analysts say there are several factors that prompted companies to no longer disburse dividends in cash to their shareholders.
“One factor is that companies’ funding needs are growing, following the accession to the European Union and increased competition, with companies preferring to keep hold of their money,” says Razvan Pasol, chairman of Intercapital Invest brokerage company.
“In addition, dividend distribution is no longer profitable for shareholders, with yields derived from dividends seeing a significant decline. Under these circumstances, there is no longer such big pressure from shareholders for dividends to be distributed in cash,” added Pasol.