In recent months, a remarkable shift has unfolded within the A-share listed companies in China, particularly in the area of cash dividendsThe notion of annual multiple dividends and first-time dividends has become increasingly prevalent, heralding a new era where these financial distributions are seen not merely as bonuses but as essential components of corporate strategy aimed at enhancing investor confidence and corporate value.

The evolution of cash dividends in the Chinese stock market took on a new dimension as we entered 2024. A noticeable uptick in the number of companies initiating multiple dividend distributions within a single year has captured the attention of investors and analysts alikeFor instance, looking at the Shanghai Stock Exchange, last year saw 24 companies distribute dividends multiple times, including Linglong Tire, which executed an impressive three dividends in one year

Advertisements

Another notable company, Shaanxi Coal and Electric Power, along with 23 others opted for double distributionsSuch practices are becoming more common, with hundreds of firms also opting for their inaugural dividend distributions since going public, illustrating the blossoming of a new dividend ecosystem in the A-share market.

Experts in the field attribute this growing trend to a combination of market maturation and regulatory impetus urging companies towards enhanced transparency and financial responsibilityAs dividends increasingly become a “must-have” for publicly traded firms amidst normal operating conditions, they are positioned as tools to elevate investment value and reinforce the commitment to shareholder returnsThe onset of multiple dividends and first-time distributions within the corporate landscape signifies a pivotal transformation that promotes a sense of stability and reliability in the capital markets.

The recently introduced "National Nine Articles" policy has further advocated for the enhancement of dividend stability, sustainability, and predictability in the market

Advertisements

The directive has spurred companies to adopt practices of annual multiple dividends, pre-dividend announcements, and even special dividends during festive periods like the Spring FestivalAs part of these efforts, companies in 2024 have been encouraged to revise their dividend strategies to increase payout frequencies and adjust their dividend ratios appropriately, aligning with the proactive stance from regulatory bodies.

Noteworthy players such as Sanqi Interactive Entertainment and Linglong Tire have set a precedent by announcing three dividend distributions throughout the yearThese companies reported their dividend plans in their first, second, and third quarterly financial disclosures, with total payouts amounting to CNY 1.386 billion and CNY 517 million respectivelyA landmark announcement in April 2024 from Sanqi Interactive indicated a shift from semi-annual to quarterly dividend distributions, marking it as the first company in the A-share space to implement a continuous quarterly dividend policy, which could set off a ripple effect among peers.

Furthermore, industry stalwarts such as Kweichow Moutai, China National Nuclear Power, Weir Group, and Mindray Medical have also announced plans for two dividends within 2024. Kweichow Moutai's cash dividend policy, revealed last August, signaled an intent to distribute no less than 75% of its annual net profit attributable to shareholders over the next three fiscal years, with distributions split into two installments.

According to Lu Zhe, Chief Economist at Dongwu Securities, there has been a gradual increase in the number of firms pursuing multiple dividends since the onset of 2024. This year has seen a substantial boost in dividend payouts as well, which positions public companies in a stronger light amid the prospects of cash returns for non-institutional investors

Advertisements

This approach not only boosts immediate cash returns to shareholders but also fosters positive feedback loops, enticing more capital inflow and easing the entry of medium to long-term investment sources into the market.

Moreover, the landscape of first-time dividend distributions is also thriving within the A-share marketStatistics indicate that over 100 companies achieved their first-ever dividends in 2024, showcasing an upward trend in corporate dividend strategiesFor instance, in December, Yangtze Power announced a cash dividend of CNY 0.21 per share, culminating in a total cash distribution of approximately CNY 5.138 billion—marking the company’s inaugural mid-year dividendSimilarly, Dong'e Ejiao launched its first mid-year dividend, amounting to CNY 737 million, which represents an astonishing 99.77% of the company’s net profit for the first half of 2024—indicating a historical high in distribution ratios.

Lu Zhe elaborates that the increased frequency of multiple and first-time dividends encourages a shift in investor behavior towards long-term investment strategies that emphasize fundamental analysis and sustainability

• New Growth Opportunities in Trade
• U.S. Accelerates AGI Development
• Cambrian Takes the Lead
• Unlocking High-Quality Development Potential
• Decline in Consumer Confidence in the UK

This evolving attitude towards value investing promotes a culture where the focus lies on companies' performance and long-term growth potentialAdditionally, the capability to deliver multiple dividends reflects robust corporate governance and healthy financial practices, prompting companies to refine their internal management, increase operational efficiency, and enhance the quality of information disclosed to shareholders.

Ultimately, the dynamic changes in the dividend landscape signal a broader movement towards more equitable and investor-friendly practices in the corporate sectorThe rise of multiple and inaugural dividends embodies a commitment to enhancing shareholder value, fostering a transparent relationship between companies and their investors, and reinforcing the fundamental integrity of the capital market itselfAs more companies embrace this trend, the implications for industry standards and investor behavior could be transformative, establishing a legacy of sustained corporate accountability and profitability.