Recent trends in dividend policies in Maltese listed companies : an assessment

Abstract

Purpose: This research analyses the recent trends in dividend policies in companies listed on the Malta Stock Exchange. It also sets out to investigate the dividend payout pattern in such companies, covering the period 2000-2010 (where applicable) and to compare and contrast such results according to different industries. In addition, the main factors determining dividend policies will be outlined. Design: This study starts by giving an outline of the literature surrounding dividend policy. This is followed by the presentation and discussion on the findings arising from semi-structured interviews with representatives from listed companies, together with an analysis of publicly available annual reports and prospectuses. A summary of the study, together with the conclusions and recommendations are then highlighted. Findings: This research finds that dividends are the listed entities' preferred method of returning wealth to shareholders. It was also observed that the dividend policy is mainly a function of profits and cash flows. Although practically all companies have a dividend policy, this is left for much speculation in the case of several companies since they only mention that they aim to strike a balance between the retention of profits, available cash flows and dividend distribution. Conclusions: The dividend policies adopted by most of the listed companies are structured in a manner which allows the companies not to commit themselves to a specific way of distributing dividends. Companies listed on the MSE should not only recognise the importance of setting out a dividend policy, but must also deliver what has been promised. Setting out in writing, together with regular communication of a clear and realistic dividend policy will reap benefits in the long term, payouts of Maltese listed companies. It is expected that this dissertation will encourage further awareness on the importance of dividends in the local scenario.