Special dividends on Johannesburg Stock Exchange : 1999-2011

Van der Bijl, Wouter Jan (2012-12)

Thesis (MBA)--Stellenbosch University, 2012.


Ever since listed companies have been allowed to buy back shares (since the Companies Amendment Act was introduced in 1999), a major question has been whether companies with extra cash should pay out dividends or buy back shares. The larger research project for the University of Stellenbosch Business School (USB) will evaluate this question by comparing the rand value of dividends paid to shareholders to the rand value of share buybacks and comparing the rand value of special dividends to the rand value of share buybacks. The research described in this report was conducted as part of the bigger research project on dividends and aimed to produce a provisional list of special dividends paid from 1999 to 2011 for all companies listed on the Johannesburg Stock Exchange. The list comprises only special dividends paid from earnings, hence the term „provisional list‟. The bigger research project to produce a comprehensive list of special dividends will include the following additional steps: 1. Determining payments from earnings and share premium. 2. Determining payments from earnings, share premium and special designated dividends (SDD). 3. Determining payments from earnings, share premium, SDD and statistically evaluated dividends. The present research showed that using databases alone would not yield viable data for research purposes. The researcher started to gather data from two databases and afterwards had to evaluate the Stock Exchange News Service (SENS) announcements to eliminate the discrepancies. Furthermore, the physical financial statements gave valuable information to produce the provisional list. The correct method to determine the true rand amounts for dividends is firstly to consult the annual financial reports and secondly to retrieve the SENS announcements. Then the entry can be verified by multiplying the dividend per share by the number of shares on the record date. This rand value can be found in the financial statements in the statement of changes in equity. The dividends paid out of share premium are easy to identify, as the entry will be specifically stated in the statement of changes in equity. The determination of special dividends is rather difficult, because the rand amount of special dividends are hardly ever published as such in the statement of changes in equity. The conclusion reached by the researcher is that the only method to obtain the correct entries for any financial evaluation is to consult the audited financial statements. Databases can be useful in obtaining some information; however, the only reliable resource to retrieve the final information is from financial statements.

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