The largest companies on the Helsinki Exchanges have not yet canceled their spring dividend plans.
Vesa Puttonen, a professor of finance at Aalto University, believes that announcements about dividend cuts or postponements will also begin to be heard from companies that have announced the cancellation or postponement of their annual general meeting due to the corona epidemic.
"It would be irresponsible now to pay big dividends on last year's earnings and let the company run into problems like this," Puttonen says.
The appropriateness of dividend distribution in the current situation was questioned from a moral standpoint in an interview with President Sauli Niinistö Ilta-Sanomat. He made a brief statement.
- Those dividends don't fit very well at this time.
Read more: President Niinistö to IS: Dividend Distribution Not Right for Coronary Spring
Puttonen is on the same line but warns many sufferers if the dividend spring is canceled.
For example, the loss of dividend income could hurt the Finnish government, which has prepared a sizeable EUR 15 billion recovery package for distressed companies.
- We have the state, the pension companies and the small investors who are waiting for dividends and have built up their budget to rely on these dividend flows.
Directly or through the investment company Solidium, the state holds, among other things, shares in Neste, Fortum, Finnair, Nokian Tires, Stora Enso, Nokia, Elisa and Sampo.
Fortum has canceled the Annual General Meeting where it was to decide on a dividend of EUR 1.10 per share. The State was receiving dividend payments of EUR 496 million.
"Future prospects dramatically weakened"
The invitations to the Annual General Meeting were due to leave before the coronavirus and the ensuing exceptional measures struck. Of the big companies, Kone already had the Annual General Meeting and paid its dividend.
Finnair, Tallink and Viking Line have canceled their dividend, Telia and Nokian Tire are cutting the proposal. All in all, many have announced that they will reduce or distribute dividends only in the fall. Larger companies have mainly announced announcements of transfers or cancellations of general meetings. Some keep the meeting at a distance.
Of the companies, Nordea and Sampo have a dividend yield of about eight per cent and UPM 5.5 per cent. Nokian Tires would only pay out half of the plan, or four percent, before paying a dividend. Neste and Elisa share the same dividend.
- It is clear that the board of directors of each company is aware of its responsibilities. When the AGM has to be postponed, it is also considered whether the new economic environment has also changed the outlook or operating conditions so that there is no reason to weaken the equity ratio.
- The outlook has been severely weakened. The board of every company will certainly think twice in this situation, which is a good thing to do.
One reason for the payment of dividends could be that they are distributed from the result of the last financial year - the money is already in the company's treasury. In the present circumstances, the argument becomes obsolete and could lead to a silly alternative. The dividend will be removed, but we will have to apply for additional money later, Puttonen points out.
He has found that most people do not fully understand what dividends are all about. Speeches on dividend fever, top dividend payers, and dividend rewards are misleading.
Shareholders meeting at the Annual General Meeting to distribute dividends jointly decide to transfer money from the cash register of the company they own to their own account. The value of the shares they own will drop by the next day as dividends.
- A lot of people do not understand the nature of the transaction, and some of the annoyance is based on it - I doubt President Niinistö would understand.