Finnish public companies to distribute record high dividends this spring
According to the calculations made by Helsingin Sanomat and the online business news service Taloussanomat, a total of around 100 Finnish listed companies will distribute a record sum of more than EUR 9 billion to their shareholders in the course of the current spring.
The highest amount of retained earnings will be distributed by the mobile telephone manufacturer Nokia, with the total of dividends amounting to more than EUR 2 billion.
As an alternative to the payment of dividends, public companies can also repurchase a number of shares of the company’s common stock in exchange, in which case the value of the remaining shares is likely to go up.
If all listed companies were to complete their existing share repurchasing programmes, the retained earnings of shareholders through these programmes would be at least as high as those through the normal distribution of dividends.
However, such redemption programmes are not always carried out. In fact, companies are no longer eager to buy back their shares. The number of those public companies who completed their repurchase programmes from 2002 to 2006 has come down year by year.
In 2007, the number went up somewhat, while only around 30 % of those companies who would have been authorised to redeem some of their share capital actually did so.
Last spring, Taloussanomat calculated that public companies would have been able to use EUR 10 billion for redemption of shares.
However, only around 20 public companies bought back their shares, the total sum being EUR 4.7 billion, while Nokia accounted for close to EUR 4 billion and the remaining companies’ purchases amounted to less than EUR 900 million.
Efforts to boost the willingness of public companies to carry out their buy-back programmes have been made even by introducing some amendments to legislation. For example, the purchase limit has been lifted from 5 % to 10 % of the amount of shares. The tightened dividend taxation has also favoured the redemption of a company’s own shares.
If Finnish public companies do not change their attitude towards repurchase programmes, the total growth rate of their aggregate profit distribution will slow down this year.
However, if Nokia completes its EUR 5 billion repurchase programme, the aggregate profit distribution of Finnish listed companies will exceed that from 2007. The relative growth will nevertheless decline.
In 2007, the aggregate profit distribution of Finnish public companies was well over EUR 12.5 billion. Moreover, if Sweden-based Nordea Bank, OMX, and TeliaSonera are included, the aggregate profit distribution of 100 listed companies was more than EUR 17 billion.
More than half of the companies will distribute more than 50 % of their last year’s profits to their owners as dividends, including a dozen or so companies which will distribute substantial extra dividends.