Chinese listed companies propose to pay investors record 1 trillion yuan in cash dividends

Dividend payouts by Chinese publicly traded companies might have exceeded 1 trillion yuan (US$157.6 billion) for the first time in 2017, as regulators push for increased cash payments to shareholders. 

About 79 per cent of the 3,494 companies trading on the Shanghai and Shenzhen stock exchanges have proposed a total cash dividend of 1.07 trillion yuan, an increase of 15 per cent from a year earlier, according to China Merchants Securities. The payouts account for 32 per cent of the combined profit generated by mainland-listed companies, the brokerage said. 

Chinese listed companies are increasingly being generous about paying cash dividends to small investors, as the securities regulator ratchets up a clampdown on “iron roosters”, a Chinese metaphor for stinginess, and bans companies from issuing bonus stocks rampantly as a way of skipping cash dividends. 

The dividend yield on the benchmark Shanghai Composite Index stood at 1.93 per cent, compared with 1.5 per cent for the one-year deposit rate, according to Bloomberg data.

Local traders, who used to care more about making money by seeking gaps in stock prices through buying and selling, have been reacting more strongly to dividend payouts nowadays.

They sent shares of Gree Electric Appliance down by 12 per cent within two days last month, after China’s biggest maker of air conditioners said it would not pay cash dividends for the first time in a decade.

The sell-off prompted the Shenzhen exchange to require more clarification from the company for doing so, and forced Gree to eventually come up with an interim dividend plan. 

About 300 billion yuan will find its way into the stock market, should the 1.07 trillion dividend proposal by listed companies be eventually implemented, China Merchants Securities said. 

Sinopec Shanghai Petrochemical generates the best return for investors in terms of cash dividend payouts among mainland-listed companies. The stock has a dividend yield, or the paid cash dividend as a percentage of its stock price, of 7.1 per cent, according to Bloomberg. 

Zhejiang Tieliu Clutch, a car parts maker, was ranked second with 5.2 per cent and Guangdong Lingxiao Pump Industry ranked third with 4.6 per cent.