Individual and institutional investors, the world over, buy shares for various reasons. While some buy shares for capital appreciation, others do so for dividends payments. For many investors, dividends-paying stocks have remained the most attractive. Despite these benefits, available data from the Nigerian Securities and Exchange Commission (SEC) show that unclaimed dividends in the capital market stood at N158.44 billion as at December 2019. This is N58.4billion higher than the 2016 figure.
A dividend is said to be unclaimed when a shareholder fails to access an already paid dividend after six months. So far, the financial services sector has the highest number of dividends paying companies. But in the last 10 years, the number of companies that promptly pay dividends to shareholders has dropped by over 10 per cent because of low return on investment.
It has also been revealed that unclaimed dividends are still on the increase despite e-dividends registration introduced by the capital market regulator in 2015. A breakdown of the N158.44billion shows that unclaimed dividends with companies (15 months and above) stood at N119billion. The ones with the Registrars of companies amounted to N14.64billion, while unclaimed dividend less than 15 months old stood at N24.77billion. Undoubtedly, this is huge. Until investors prove ownership of their shares, unclaimed dividends will continue to increase. To frontally tackle the issue of unclaimed dividends, we urge the affected companies to publish the list of owners of such dividends in the media and sensitise them on how to reclaim the dividends.
Data from the e-capital market regulator also indicated that most of the unclaimed dividends began years after the banking consolidation when many investors bought shares with different names and postal addresses which they were yet to rectify. A lot of stockholders have also failed to make use of the forbearance window introduced by SEC, a few years ago, to enable investors that bought shares with different names to regularise their accounts in order to reduce the quantum of unclaimed dividends.
Over N100 million of the unclaimed dividends was reported to come from failure of many shareholders to utilise the forbearance window, especially those shares that were close to being statute barred. The extant law on unclaimed dividends is very clear. For instance, the Companies and Allied Matters Act (CAMA) 1990, provides that dividends which are not claimed after 15 months of being declared, should be returned to the firm where the investor/beneficiary may make claim not later than 12 years. In other words, the shareholder will forfeit any dividend not claimed after 12 years. Based on this proviso, there is still hope for investors and shareholders to recover their unclaimed dividends within the stipulated period. But they should be adequately informed by the SEC on how these dividends can be reclaimed forthwith.
Early in the year, the SEC approved a financial investment advisory product introduced by Integrated Trust Limited, a Nigerian registered Investment Company to address this challenge through the enforcement of e-payment system. The benefits of the new product include alleviating the suffering of investors over missing or lost investments, reducing the issue of missing shares and unclaimed dividends as well as fixed-income securities in the Nigerian Stock Exchange (NSE) and the enhancement of investors’ confidence in the capital market. We believe that the most effective solution to unclaimed dividends remains the e-dividends payment platform. The system makes it easier for a shareholder to claim all his lost or unclaimed dividends the same day.
E-dividend payment channel enhances the transparency in the administration of dividend payment and eliminates the cost associated with printing and posting of dividend warrants. It is, therefore, important that the National Assembly should enact a law that will make it easier for unclaimed dividends to be claimed by their owners or the relatives of dead shareholders beyond the 12 years stipulated by CAMA, 1990. We say this because the bulk of the unclaimed dividends might belong to dead shareholders. Any plan that will enable the relatives of dead shareholders to claim the unclaimed dividends will go a long way in tackling the problem. We urge the SEC and affected companies to resolve this problem once and for all.