Goodbye to unclaimed dividend; welcome E-dividend

The issues of unclaimed dividend estimated at over N90 billion to date is a protracted problem compounded by inefficient postal system and lack of adequate residential addresses in Nigeria. Consequently, investors’ dividend warrants from companies either get lost in transit or are received as stale. But with the launch of the E-dividend platform by Securities and Exchange Commission (SEC), Assistant Business Editor, CLEMENT NWOJI, who recapped the ugly past, concludes that it is goodbye to the era of unclaimed dividend.

If the motive for investing ones’ hard earned money in purchase of any company’s shares is to further receive returns on ones’ in­vestments, then how would one feel when the expected dividend warrant does not get to one either because of change of address or that before it is received, the warrant had already become stale? Or what if the value of the dividend warrant is so small to the extent that the processes of cashing the said dividend warrant worth about a paltry sum of N530 for instance, at the designated bank, will take at least N800 in transporta­tion, which is much more than the value of such dividend?

The above scenario constitute the experiences of most low and medi­um-level shareholders nationwide whose dividend warrants either never get to them, got stale in tran­sit or the value are negligible that going to claim such would amount to spending excess money far above the total value of the dividend. Such experiences have led investors in the Capital Market to abandon their dividend warant resulting to un­claimed dividend estimated at over N90 billion, according to statistics from the SEC, the regulatory body of the nation’s Capital Market.

For clarity, a dividend can vari­ously be defined as a sum of money paid regularly, often times annually, by a company to its shareholders out of its profits, mostly after-tax. It is also a distribution of after-tax portion of a company’s earnings or profits decided by the board of di­rectors, to a class of its shareholders. Although it can be issued inform of other property, but the most com­mon is cash payments usually trans­mitted to the beneficiaries through physical dividend warrants in Nige­ria. One may ask why dividend? And the answer is simply that a company pay dividend on stocks/shares pur­chased because many investors like the steady income associated with divi­dends, so they will be more likely to buy that company’s stock. Investors also see a dividend payment as a sign of a com­pany’s strength and a sign that man­agement has positive expectations for future earnings, which again makes the stock more attractive.

However, despite the luring attrac­tions of dividends, the processes of get­ting the physical dividend warrants by companies to the actual beneficiaries had been beclouded with difficulties and uncertainties until the recent intro­duction of the e-dividend payment plat­form by SEC. According to the Head, Market Development Department of SEC, Mr. Henry Rowlands, “We discov­ered that when dividends are declared by the companies where they (inves­tors) invest, they are sent by post which takes time and sometimes they do not even come at all. And because investors change addresses, some of the dividend warrants do not even get to them.

“Having looked at it as at 30th Sep­tember 2015, the Commission realized that unclaimed dividends amounted to about N90 billion. SEC determined that we will address it once and for all and that is why the Commission launched the electronic dividend portal. Electron­ic dividend simply refers to an online system of paying dividends to inven­tors whereby when companies declare dividends which are the profits meant for investors, rather than send it by post, they will just wire it to the investor’s bank account and that is what informed this exercise. The Commission desires that the money of investors hanging as unclaimed dividends get paid to them with ease”.

A recap of some experiences will suf­fice. For instance, Mr Okon from Akwa-Ibom state is a shareholder of one of the flourishing banks in the country and he belonged to the middle level sharehold­ers’ class whose total shares does not attract huge amount of dividends. He narrated that having been in Lagos for a while and had been changing from one location to the other with different addresses, he only received his dividend warrants twice through his former resi­dential address. And since then, subse­quent ones either gets to him as stale dividend warrants or does not get to him at all.

Also, on his part, Mr. Adewale who re­sides in Abuja recalled that since the 2008 global financial meltdown when the Ni­geria Stock Exchange (NSE) lost about 70 percent of its stocks value, the worth of his shares had crashed and the value of his dividends is not worth the troubles of going to the designated banks to deposit the dividend warrants unless there is an­other compelling transaction in the bank. It is then that he would remember to take them (received dividend warrants) along for depositing.

Although the above instances vividly captured most of the harrowing experi­ences of investors in the Capital Mar­ket, but the Director General of SEC, Mounir Gwarzo assured that they are now a thing of the past with the in­troduction of e-dividend payment recently launched by the apex Capital Market regulator. He spoke recently at a town hall meeting meant to sensitize the investing public on the e-dividend platform and registration processes na­tionwide.

According to him, “We have all agreed that this is the way to go, it is now left for the investors to go and reg­ister. We have agreed with all the stake­holders that for the first 90 days the registration is going to be free. After 90 days, anyone that wants to register will pay N100.00. Once the e-dividend is in place the issue of stale warrant will be of the past, the issue of travelling from one place to another to deposit the warrant will be a thing of the past; the issue of change of address will also be eliminated. The issue of unclaimed dividend which according to our re­cords is in excess of N80 billion will also be a thing of the past. These un­claimed dividends came about from dividends of small stakeholders like you and me and we need to ensure that they are claimed”.

It is not only that the e-dividend will resolve issues of further unclaimed dividends in the country, but it will facilitate the payments of outstand­ing arrears of unclaimed dividends which are not beyond 12 years old by affected companies and corporate or­ganisations. “Once we are able to get through with the registration process, those dividends that are less than 12 years, once the registrars can certify that the people are the owners, they should be able to pay them. Gradually we should be able to address the prob­lem of unclaimed dividends,” the Di­rector General of SEC assured. And so, with the e-dividend, it is a bye, bye to unclaimed dividends!