BSP Reports On Economic Contractions
A report by the Bank South Pacific (BSP) has shown that all economies have witnessed important contractions in economic activity which resulted in cutting back of profits and dividends by companies.
The report also revealed that global firm dividend payments were touted to decrease by 17.5 to 20 per cent this year.
On whether this was caused by travel restrictions and lockdown measures, BSP chief executive officer Robin Fleming said, “As a consequence, the profits generated by many companies worldwide have reduced in comparison to previous years. Given that dividend distributions are a function of profit generation and capital management, many companies are likely to pay lower dividends in 2021 than would have been the case this year.”
He added, “PNG is no different to other countries and many businesses will be reporting lower profits this year due to the difficult trading conditions. Some businesses will take a decision to preserve capital until the economy picks up and may not pay dividends for cash management and capital management purposes. Other businesses may take a different approach and maintain their dividend payout ratios at similar levels than previous years but as the profit generated will be lower the actual amount of the dividend will be less than previous years as well.”
Fleming said that in June on its 2019 audited profit, BSP paid a dividend of K0.96 per share - when including the interim dividend, paid in October 2019, showed a payout ratio of 70 per cent as compared with a payout ratio of 75 per cent last year.
“We paid an interim dividend of K0.25 per share in October 2020, which was lower than the interim dividend of K0.38 per share in October 2019, due to a combination of a lower reported profit due to the reduction in our indicator lending rate of one per cent on April 1 and increased lending provisions in consideration of the impact of the Covid-19 on our customers’ businesses,” he said.