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More companies pay US$ dividends

MORE companies on the Zimbabwe Stock Exchange are declaring dividends in foreign currency as domestic US dollar earnings soar across the economy, with rising usage of the currency.

It comes as a number of companies have also reported growing foreign currency sales.
First Mutual Holdings (FML), a publicly traded insurance company, has declared an interim dividend of $125 million ($80 million plus US$125 000) for the half year ended June 30, 2022. Its last dividend was exclusively in Zimbabwe dollars.

FML reported a $16,9 billion profit for its half-year period ending June 30, 2022. Fair value gains from the group’s property operations were a significant contributor to the sizeable profit growth.

It is observed that growth in income (excluding adjustments) at 32 percent was outpaced by growth in total expenditures at 59 percent, and netting the figures off returned a deficit of $6,5 billion.

Mid-tier stock Zimre Holdings, having considered the group’s level of profitability and reserves, the economic downturn as a result of the Russia-Ukraine war, and associated risks to business growth, will be declaring its first US dollar-denominated dividend of US$250 000.
“The dividend is in line with the group’s policy to pass positive cash flows from investments to the ultimate shareholder,” the company said in a statement. The dividend is for the half year ending June 30, 2022.

In the same period last year, the company’s dividend policy stated that it would declare and pay dividends subject to its level of profitability after providing for contingent liabilities and reserves.

As a result of the company’s growth strategy and the effects of the Covid-19 pandemic, the board considered it prudent not to declare an interim dividend for the half year ended June 30, 2021.

Hotelier African Sun resolved to declare an interim dividend of $0,102118 per share plus US$0,000545 per share, with respect to the half-year that ended June 30, 2022. In the comparable period last year, it did not declare a dividend, citing the need to preserve cash amid the Covid-19 uncertainties.

Rainbow Tourism Group is also paying out a portion of its dividend in US dollars for the half year ended June 30, 2022.
Previously, the board of directors resolved not to declare a dividend owing to the uncertainty created by the Covid-19 pandemic-induced national lockdowns and the possible impact on revenues and cash flows.
Economist Yona Banda thinks the forex dividends are also, to some extent, compensating shareholders for weak share price performance in the bearish market.

“A lot of shares are trading below a price-to-book ratio of 1x, which might be another push factor for the companies to improve market sentiment,” he said.
“I think other companies with the capacity to sustainably pay foreign currency dividends will probably follow suit.”
The government instituted several measures, including high-interest rates and gold coins, to reduce ZWL$ liquidity and stabilise the exchange rate.

However, the reduction in Zimbabwean dollar liquidity resulted in the softening of demand for goods and services in supermarkets while increasing US dollar transactions in general trade.
Lloyd Mlotshwa, director at IH Securities, said companies are generating higher percentages of their earnings in US dollars in the current environment.
“It is fair and justified that shareholders are rewarded in the same currency,” he said.

“I believe this will become a trend; at the moment, employees, suppliers, and service providers are increasingly being paid in US dollars; on this basis, it is critical that shareholders be remunerated in the same way.”

Economist and columnist Vince Musewe said that is a great move for patient investors and it also makes investment on the ZSE attractive.
“It would be most welcome as they seek to retain their investors,” he said.

More companies are poised to change their functional currency to the US dollar now that the bulk of their revenues are in foreign currency.
This comes at a time when the hyperinflation environment is a headache for accountants and auditors. It is believed that this affected the timely publication of results.
newsdesk@fingaz.co.zw