Firms withhold dividends amid uncertainty

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SEVERAL companies listed on the Zimbabwe Stock Exchange (ZSE) have refrained from declaring their half-year dividends, citing economic uncertainty and the necessity to conserve cash.
Despite the norm of distributing dividends annually in both cash and stock forms, with some fundamentally strong companies in the country’s stock market paying quarterly and semi-annually as interim dividends, not many have been declared thus far.
“Many of these companies are conserving cash to utilise in lean times,” said Nivteil Capital’s chief investment and research officer, Malvin Chidzonga.
“In addition, some companies are reinvesting through capital expenditure and bolstering their working capital positions.”

Investment analyst Enock Rukakrwa concurred, stating that dividend policy was “largely a function of the operating environment.”
He added, “The majority of listed companies continue to grapple with liquidity challenges in both Zimdollar and US dollar terms, leading to weakening free cash flows.”
Khaya Cement, formerly Lafarge Cement Zimbabwe, which reported a 117 percent increase in volumes during the half-year to June 30, 2023, did not declare a dividend despite earning 89 percent of its revenue in foreign currency, a 100 percent percent increase from the previous year’s comparative period.
Similarly, Starafrica Corporation did not declare a dividend.
“Given the company’s focus on maintaining adequate working capital, the Board has decided not to declare a dividend for the six months ended September 30, 2023,” said Chairperson Rungamo Mbire.
National Tyre Services (NTS) also refrained from declaring a dividend.
“In the face of a fluid economic outlook, the Board deemed it prudent to preserve capital and not declare a dividend to ensure adequate stocks were maintained to capture market share and enhance service delivery for long-term sustainability,” stated NTS Chairman Rutenhuro Moyo.
The country, due to the cyclical nature of commodity-dependent economies, has been experiencing accelerated currency depreciation for some months. The swing in exchange rates over the first half of the fiscal year had a significant impact on industry operations, according to Moyo.
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