China Securities Journal | Cash Dividends Increase Year by Year: Dividends of SSE-listed Companies Surpass Financing Amounts Last Year

Translated from China Securities Journal

Data shows that the cumulative cash dividends of Shanghai Stock Exchange (SSE) listed companies over the past decade (from 2013 to 2022) have reached RMB 10.12 trillion yuan. In 2022, SSE-listed companies distributed a total of RMB 1.72 trillion yuan in cash dividends, marking a year-on-year increase of more than 12%. Among the 1,528 SSE-listed companies that distributed cash dividends, 70% had a dividend ratio of over 30%. Notably, the total amount of cash dividends issued by SSE-listed companies in 2022 has surpassed the combined amount of equity financing and major shareholder reduction, resulting in a more balanced investment and financing landscape.

Beijing, June 26, 2023, Xinhua Finance: A-share listed companies have entered a period of intensive dividend distribution since late June. According to Wind data, the cumulative cash dividends of SSE-listed companies over the past decade (from 2013 to 2022) have reached RMB 10.12 trillion yuan. In 2022, SSE-listed companies distributed a total of RMB 1.72 trillion yuan in cash dividends, marking a year-on-year increase of more than 12%. Among the 1,528 SSE-listed companies that distributed cash dividends, 70% had a dividend ratio of over 30%.

Notably, the total amount of cash dividends issued by SSE-listed companies in 2022 has surpassed the combined amount of equity financing and major shareholder reduction, resulting in a more balanced investment and financing landscape. Industry experts believe that high dividends will solidify the foundation of value investment in the capital market. It is expected that the dividend level in the A-share market will further approach that of developed markets in the future.

SSE-listed state-owned enterprises (SOEs) serve as the main force in rewarding investors

In recent years, A-share listed companies have demonstrated a significantly increased willingness to share their profits with shareholders through cash dividends, with the intensity of cash dividends reaching record highs alongside the growth of corporate performance. Yi Huiman, Chairman of the China Securities Regulatory Commission (CSRC), revealed at the 14th Lujiazui Forum that the amount of dividend payments by listed companies in 2022 has surpassed RMB 2 trillion yuan for the first time.

Using the example of the SSE, it has been observed that the cash dividends of SSE-listed companies have shown a consistent annual increase over the past 10 years. The total cash dividend amount has grown from RMB 661.357 billion yuan in 2013 to RMB 1.72 trillion yuan in 2022, with a significant year-on-year growth rate of over 12% in 2022.

In-depth analyses reveal that in 2022, a total of 1,528 SSE-listed companies distributed cash dividends. Among these companies, approximately 70% had a dividend ratio of over 30%, accounting for 84% of all profitable companies. Regarding the dividend amounts, 164 SSE-listed companies disbursed dividends of more than RMB 1 billion yuan, while 26 companies distributed dividends exceeding RMB 10 billion yuan.

Regarding the consistency of dividend distribution, 107 SSE-listed companies, including 40 central SOEs, have consistently distributed cash dividends of over RMB 1 billion yuan for three consecutive years. Among those companies, 17 companies, including the Bank of China Limited, Industrial and Commercial Bank of China Limited, China National Petroleum Corporation, China Petroleum & Chemical Corporation, China Yangtze Power Co., Ltd., Kweichow Moutai Co., Ltd., and Ping An Insurance (Group) Company of China, Ltd, have maintained dividend distributions exceeding RMB 10 billion yuan for three consecutive years. Regarding the dividend payout ratio, 764 SSE-listed companies have maintained a dividend payout ratio of over 30% for three consecutive years, while 117 companies have consistently achieved a dividend payout ratio exceeding 50% over the same period.

According to a representative from Pingdingshan Tianan Coal. Mining Co., Ltd., as the market's emphasis on value investment continues to strengthen, an increasing number of listed companies will likely maintain a higher cash dividend ratio, generating favorable returns for investors and solidifying the foundation for long-term and value investments.

SSE-listed central SOEs serve as the main force in rewarding investors. Of the aforesaid SSE-listed companies that distributed dividends in 2022, 215 were central SOEs, collectively disbursing a total of RMB 1.05 trillion yuan in dividends. The median dividend ratio for these enterprises was 31.25%. Notably, 55 central SOEs distributed dividends of more than RMB 1 billion yuan, while 19 central SOEs distributed dividends of over RMB 10 billion yuan. Industrial and Commercial Bank of China Limited, China Construction Bank Corporation, and China Mobile Limited ranked among the top three in terms of total cash dividends amount, with respective amounts of RMB 108.2 billion yuan, RMB 97.3 billion yuan, and RMB 82.1 billion yuan.

Achieving a virtuous cycle of injection and creation

"Quality enhancement of listed companies ultimately manifests in their ability to create and allocate value," stated a representative from Daqin Railway Co., Ltd. in an interview.

Initial calculations reveal that the cash dividend amount of SSE-listed companies in 2022 (RMB 1.72 trillion yuan) has already exceeded the total amounts of equity financing and major shareholder reduction throughout the entire year. Data indicates that in 2022, SSE raised a total of RMB 358.891 billion yuan through IPOs and RMB 665.965 billion yuan through subsequent capital-raising activities, resulting in an aggregate equity financing of RMB 1.02 trillion yuan. Meanwhile, during the same year, SSE-listed companies' major shareholders and specific shareholders with less than a 5% stake collectively reduced their holdings by nearly RMB 642.2 billion yuan.

Market participants have commented that this signifies a more balanced investment and financing landscape. When the amount of dividend distributions and share repurchases exceeds the sum obtained through financing and shareholding reductions, it fosters a virtuous cycle between capital injection and creation.

Delving into specifics, 327 SSE-listed companies' dividend payments since their listing have surpassed the funds obtained through IPOs and subsequent capital-raising activities from the market. Among them, 65 are central SOEs, with 15 companies like Industrial and Commercial Bank of China Limited, Petrochina Company Limited, China Shenhua Energy Company Limited, China Mobile Limited, and Baoshan Iron & Steel Co., Ltd. maintaining a gap of over RMB 50 billion yuan between their cumulative dividend payments and capital-raising amounts.

A representative from Daqin Railway Co., Ltd. affirmed that since its listing, the company has maintained an average annual cash dividend ratio of over 50% and accumulatively paid RMB 91.8 billion yuan in dividends. When including the cash dividend distribution plan approved at the company's 2022 annual general meeting, the aggregate dividend payment approaches RMB 99 billion yuan, equivalent to 1.5 times the total funds raised through IPOs and subsequent capital-raising activities.

Rewarding investors with substantial financial returns and sharing growth with shareholders is highly likely to garner investor favor. "In the long run, companies that deliver strong returns can to a certain extent captivate value investors and institutional investors," remarked a representative from Pingdingshan Tianan Coal. Mining Co., Ltd.

High dividends solidify the foundation of value investment in the market

"The CSRC will diligently implement the three-year action plan to enhance the quality of listed companies. This initiative aims to bolster their governance, competitiveness, innovation, risk resilience, and return-earning capabilities, thereby solidifying the foundation of a valuation system with Chinese characteristics." Yi Huiman highlighted this at the 14th Lujiazui Forum on June 8, 2023.

Among these capabilities, the manifestation of return-earning capability lies in dividend distribution. Industry experts believe that policy guidance, dividend improvements, and enhancement of fundamentals play pivotal roles in ensuring that the market recognizes the valuation system with Chinese characteristics. The provision of sustained and stable high dividends not only showcases the robust performance and ample cash flow of listed companies, but also fosters the confidence and sense of gain of investors, thereby underscoring the long-term stability, growth potential, and intrinsic investment value of listed companies. Ultimately, this cultivates a propitious environment for the high-quality development of the capital market.

Recent fervent interest in themed funds pertaining to SOEs and central SOEs serves as compelling evidence. In May, China Universal Asset Management Co., Ltd., GF Fund Management Co., Ltd., and China Merchants Fund Management Co., Ltd. concluded their respective subscriptions and initiated allocations for their CSI & Guoxin Central SOEs Shareholder Return ETF products. On June 16, 2023, China Southern Asset Management Co., Ltd. announced ahead of time the closure of its subscription period for the Southern & CSI & Guoxin Central SOEs Technology Leading ETF, owing to significant oversubscription.

Predictably, the dividend practices of A-share listed companies will witness further improvement given the encouragement and impetus from the current policies. It has been observed that multiple companies have recently issued dividend plans for their shareholders for the upcoming three years (2023 to 2025). These plans unequivocally express the commitment to offering reasonable returns to shareholders, aiming to enhance transparency in decision-making and operability of profit distribution. This will facilitate shareholders' oversight of the company's performance and profit distribution.