By Anthony Morgan  

Financial companies owning shares in other companies on the stock market as well as pension funds stand to greatly benefit from the resumption of full dividends. This also augurs well for individuals that are invested in these types of companies. 

The recent agreement reached between the Bank of Jamaica and financial holding companies sees payments being extended beyond just persons who owned less than 1% of shares in financial holding companies.  

“It means those in excess of 1% are now able to receive those dividends declared last year and 2019,” said Research Analyst at Sagicor Bank, Jodian Aris. 

Research and Strategy Analyst at Sagicor Investments, Jodian Aris,

According to Aris, the Central Bank’s move is in line with what’s happening with the global market. In a press release, the bank noted that its decision was driven by its belief that the worst of the pandemic has passed. It also said financial institutions have managed risks proactively over the past year.

 “I know the federal reserve has indicated that they plan to end their temporary restrictions on banks around the first half of 2021. Just to remind us that the restrictions are really precautionary. It wasn’t because the banks were in any particular deep weaknesses why they had to impose these restrictions, it’s just in the event that things got really bad they wanted to make sure that banks had a buffer or a cash allowance,” she said.

She said the approval will positively impact a few listed companies which also have ownership in other financial companies as the freeze on dividend payments would have negatively affected their books over the last year.

“So if you think about PANJAM which has about 30% shares in Sagicor, they are now able to get their payment. Having Sagicor not pay them last year really affected their cash flow,” she said.

“Overall it’s good news for financial companies that have been depressed from not being able to distribute dividends to everyone even though they had declared it,” she added.

Aris said pension funds would have also been impacted by the freeze and are shaping up to use the incoming funds to conduct activities they would have postponed.

“They were affected because they are some of the big holders too in some of these companies and some persons would have noticed their pensions revaluing based on the fact of financial assets dipping last year,” she said.

At least one financial institution, National Commercial Bank (NCB) has announced that it will not be considering a dividend in the first quarter even though the Central Bank said they could.

Aris said this has caused a slight dip in their stock price, but notes that the bank is possibly acting on good judgement in light of the uncertainties that still linger with the pandemic. 

She also believes they could decide to start making declarations around the second half of the year.

“They are really the larger bank. If you look at market share, they have about 35% of the overall deposit taking market, and as such their exposure is a bit higher than other banks so they want to be a little bit more conservative than others based on their loan book,” she said.

In the meantime, Senior Wealth Advisor at Ideal Portfolio Services, Orick Angus, agrees that the resumption is good news for larger shareholders who would have really felt the effects of the temporary halt.

Senior Wealth Advisor at Ideal Portfolio Services, Orick Angus

“Ideal also has a large stake in NCB, Sagicor and Scotia so our revenues have been affected by non paying out of dividends,” he said.

“Cash flow is coming back now so they [larger shareholders] can hop back on their high horse and put that cash where it’s supposed to go. Some will go back into the market as well,” he added. 

Angus said with most companies having reduced the amount they would have usually paid out, he doesn’t anticipate that those figures will be increased just yet.

He said he also does not expect any special dividend payouts now, but projects there will be a gradual increase in amounts returned to shareholders over time as the economy continues to recover from the pandemic.

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