Maritime Shareholders' High Dividend Expectations Unmet - Underlying Common Reasons
Preface
In recent fiscal meetings, Taiwan's leading shipping companies, Evergreen (2603-TW) and Yang Ming (2609-TW), faced small shareholders pushing for higher or more frequent dividends. Despite stellar profits last year, these companies opted to keep dividend rates no higher than 50%. The rationale lies primarily in the necessity for significant capital investment in energy-efficient vessels—an essential move to secure a competitive edge over the next two decades in a rapidly evolving market.
Lazy bag
Key shipping firms, Evergreen and Yang Ming, retain significant profits to invest in energy-efficient ships, maintaining lower dividend ratios due to uncertain market conditions.
Main Body
During Evergreen's latest shareholder meeting, the topic of restructuring the current annual dividend policy to a quarterly one was addressed. A financial officer from Evergreen explained that in today's volatile economic environment, disbursing earnings annually better supports both the company’s growth and the long-term interests of shareholders. They emphasized that while capital expenditure and cash planning flexibility are crucial, the company’s strong operational performance ensures the potential for rapid dividend recovery even when adopting an annual approach.
Evergreen highlighted how their ability to recover dividends swiftly is dependent on their profitability and market confidence in their future performance. Yang Ming, on a similar note, responded to queries about increasing cash dividends to NT$10 per share. They reiterated that considerations based on annual operational outcomes, capital requirements, and future business needs dictate their decision to maintain a dividend of NT$7.5 per share, as it aligns with supporting the company’s long-term development and shareholder interests.
The financial performance of these companies in the previous year was robust. Evergreen's earnings per share (EPS) reached NT$64.87, the second-highest in history, with the board approving a cash dividend of NT$32.5 per share at a 50% payout ratio. Yang Ming recorded an EPS of NT$18.38, the third-highest ever, issuing a cash dividend of NT$7.5 per share, marking a payout ratio of approximately 40%. Wan Hai, another major player, achieved a historic third-highest EPS of NT$16.89 and decided on a cash dividend of NT$3.5 per share, with a payout ratio around 20%.
These dividend policies effectively preserve over 50% of the revenue earned, with industry insiders revealing that energy-efficient vessels can cost up to twice as much as standard ships. Furthermore, the current market climate's volatility necessitates that shipping companies keep substantial cash reserves.
Key Insights Table
| Aspect | Description |
|---|---|
| Dividend Policies | Shipping companies keep dividends capped at 50% to invest in future competitiveness. |
| Investment in Fleet | Significant funds are needed for energy-efficient ships, which are costlier but essential. |