August 02, 2008 7900 VIEWS
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It is expeceted that the e-dividend would: 

  • Eliminate/minimize cases of unclaimed dividends through direct credit of dividends into shareholders accounts.
  • Minimize zero tolerance of dividends loss in transit
  • Eliminate the forfeiture of dividends in the future. 
  • Avoid incidence of unclaimed dividend and to enhance ability of shareholders to immediately access and utilize the proceeds of their investments.

 

What is dividend?

 

  1. Dividend is the portion of company’s earnings distributed to its shareholders.

 

What is unclaimed dividend?

 

It is dividend made available but not claimed by investors for a number of reasons.

 

What are the problems of the warrant system of dividend payment?

 

These may arise as a result of the following:

 

i.               Multiple applications by applicants during the privatization/public offer process and their inability to maintain regular signatures to collect dividends.

ii.              Shareholders without a will (intestate) have died and did not indicate any        information on their next of kin.

iii.            Deliberate act to deny investors their benefit through various schemes by companies who lack liquidity to pay and/or have to borrow to pay.

iv.            Inefficiency of the system.

v.             Poor logistics management and inadequate update of personal data on the part of shareholders.

vi.            Non-dividend payment due to postal clearing delay.

vii.          Wrong or incomplete mailing addresses of shareholders kept by Registrars because shareholders have not notified registrars of change of mailing addressees.

viii.         Lack of awareness by some investors, who do not understand the intricacies of investment in shares.

ix.            Small dividends are abandoned for not being worth the effort to attempt collection.

 

What is e-Dividend?

 

e-Dividend refers to the payment of dividend due to a shareholder through a direct credit into his or her nominated bank account rather than issuance of cheque or warrant.

 

It is convenient, secure, online means of paying dividends directly to the shareholder’s account instead of printing and mailing dividend warrants as currently in use.

 

When was e-Dividend introduced into the capital market?

 

e-Dividend was introduced by Securities and Exchange Commission and formally launched into the Nigerian Capital Market on Thursday, 28th February, 2008 in Abuja by the Honourable Minister of Finance, represented by the Honourable Minister of State, Finance Remi Babalola.

 

Benefits of e-Dividend

 

The benefits are as follows:

 

Investors:

 

i.               It will minimise the incidence of unclaimed dividends in the system.

ii.              Shareholders will receive their dividends promptly, without the hassles of lodging or cashing their cheques or warrants in banks.

iii.            The system eliminates the possibility that warrants are not received or are lost by recipients.

iv.            Increase transparency and efficiency in the administration of dividend payment.

v.             Investors will be able to monitor and tract dividend payments more effectively.

vi.            Faster and more secured dividend payments- shareholders will get credit for dividend declared within 24 hours of payment.

vii.          More investors will be attracted into the capital market.

viii.         More satisfied investors as dividends are received promptly.

ix.            It implies same day clearance for dividend payment, following which a confirmation letter of the dividend payment is then sent to the shareholder through the Registrars.

x.             Increase transparency in the administration of dividend payment.

xi.            It eliminates the problem of returned dividend warrants where a shareholder changes address without notifying the company.

xii.          Saves time as there will be no more waiting for the dividend warrant in the mail or queuing to pay in the bank.

 

Organisation/Companies                

 

i.               Streamlining of dividend payment process.

ii.              Comprehensive daily reports generation to track transactions.

iii.            Timely implementation of specific details (such as stop payment instructions) as per client’s requirement on a best effort basis.

iv.            Auto reconciliation process.

v.             Listed Companies benefit from zero cost of cheque printing as well as from other related work.

vi.            In the long run, Companies/Registrars using the e-dividend process are expected to reduce the turnaround time and man-hours involved in processing dividend payments and monitoring their status.

vii.          Eliminate the costs associated with printing and postage of dividend warrants. Listed companies benefit from zero cost of cheque or warrant printing as well as related back office work.

viii.         Tracking of transactions is faster and reports can be easily generated.

 

(Source: Securities & Exchange Commission, e-Dividend in The Nigerian Capital Market)

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