‘Why Shareholders Rejected UTC’s Dividends’

Many described it as a rare occurrence that Nigerian shareholders, who are always yearning for dividends, no matter how small, could advise a company to plough back money meant for dividend payment into the business. But that was what shareholders in UTC Plc did recently.
UTC had recently, in its audited account for the year ended December 31, 2008 declared as dividend of N0.03. However, the shareholders, at the AGM held recently unanimously resolved that the dividend be kept in its reserve. Giving reasons for the unusual action, the shareholders have said they did so for UTC in understanding of the company’s plight and in expectation of better dividends in subsequent years.
The National Chairman of Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, who spoke on the shareholders’ decision, said the company had suffered liquidity crunch in recent times which almost led to its liquidation, adding that as a result, the shareholders felt that whatever money it makes should be re-invested in the business for better future performance.
He said in recognition of the UTC’s liquidity needs, shareholders decided that it would be better for the company to deploy the N160 million meant for the dividend payment rather than going to the bank for loans, which would attract huge interests.
His words “We know where we are coming from; we are fortunate that the company did not die because the company still surviving till today is a miracle. As a result of cash deficiency, we resolved that they should not resort to borrowing from the bank, which will attract huge interests. And we decided that instead of paying that N160 million, they should put it in the business.”
Okezie added that apart from the need to help the company, the N160 million, if shared, would amount to nothing to the shareholders while huge expenses would also be incurred by the company in posting the paltry sum. “If you consider the expenses that would be incurred in sending the dividend and the withhold tax of 10%, at the end of the day what shareholders will be getting may not be up to two kobo”, he said.