The Impact of Dividend Announcement on Stock Market

8/12/2019 The Impact of Dividend Announcement on Stock Market

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The Impact Of Dividend Announcement OnStock Market

Dividend is that part of the earnings of a corporation that is distributed to its shareholders whichis usually paid quarterly.

But why do companies pay dividends? In Finland, dividend policy has always been the main

concern according to some few empirical studies. But they normally based it on assumptions

that each security has an intrinsic value based on the economic conditions of the firm. These

economic conditions are determined on many things like: earnings, dividends, capital structure

and growth potential. We called it the fundamental stock analysis.

Some stocks, especially blue chips, pay dividends. This means that for every share you own,

you are paid a portion of the company's earnings. For example, for every share own, you will

get sent $0.15 every year. Most companies pay dividends (four times a year). This study

focuses on dividend policy of companies listed on the stock exchange of Mauritius. Since early

1960, the dividend debate has been lively interesting, why it is like that? As some economists

have analysed the effect on the value of the firm and explored the data of evidence that

dividend policy affects security prices and investors behaviour.

In developed countries managers and economists together have recognised that dividend policy

plays an important role in the overall corporate strategy since the decision between paying

dividends and retaining earnings has been taken seriously by investors. Indeed the dividend

debate has not been restricted not only to equity markets in developed countries but has been

carried out in emerging markets. Some Studies have shown that dividend policy in those

markets is often different from the norms that have been accepted. In developed countries and

that in emerging markets firms place more emphasis on dividend payout ratios than they do on

the level of dividend paid. As a result dividend payments tend to be more volatile in emerging

markets than in the developed countries

1.2-How Mauritius is as an emerging MarketMauritius is a fast developing independent island in the Indian Ocean. It has followed a classic

pattern off economic development, moving from agricultural based economy in the 1960 to a

manufacturing based in the 1970 and 1980. Since then, we can see how Mauritius how

developed its economy. The Mauritian economy was then noticed by exceptionally high


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increase in GDP (GROSS DOMESTIC PRODUCT) and the achievement of full employment. Its

Normal that Mauritius could not sustain such an economic growth rate by relying only on

Agriculture and manufacturing industries. That is how Mauritius comes with the idea to diversify

its economy and henceforth integrate into the world economy. He first diversifies f into the

financial sector. The successful economic achievement in the 1980s brings a rapid growth in

this sector and hence in 1988 the stock Exchange was established in Mauritius.

1.3-Objective of Study

This study focuses on dividend price on the sevencompanies listed on stock exchange of Mauritius

for the year 2010.It is intended to find out howdividend changes before the final dividend dateand after the final dividend date .

1.4-Structure of Project

The Project was mainly based on dividend

reactions on the Seven Companies .It Includes datadownloaded from the website or taken fromauthors of dividend policy and also somecommunication which was exchanged by the Headof department of Sbm Securities which helped meto find out the data.

2 LITERATURE REVIEW

2.1 Theoretical View Points

Normally we have two different theories that explain what the relationship between Dividend

Policy and the Price of Shares. They are categorized into two groups:

The Irrelevance School


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The Relevance School

In the Irrelevance School we have Merton and Miller .

This man clearly state that dividend dont really affect value , He also said that there was now a

substantial agreement within the academic community which is based in turn on many careful,scientific statistical studies and there is no systematic exploitable relation between a firm

dividend policy and the value of its shares.

Normally that value is governed by its earnings or more precisely by its earnings power.

It is of considerable importance the effect of a frim dividend policy on the current price of its

shares ...not only to the corporate officials . but also to those investors who are planning

portfolios and also to the economists that are seeking to understand and appraise the

functioning of the capital Markets.

According to similar ideas like JOHN FREEAR (1980), the whole question of dividend policy is

controversial. Like some say that it has no effect whatever on the finance market assessment of

the value of a company, others argue that the market pays much more attention in assessing

dividends that to earnings. Indeed the relationship between dividend and the value of the share

is not clear cut. Normally a Finance Manager must understand the various conflicting factors

first which influence the dividend policy before he decide how to allocate its companys earni ngs

into dividends and retained earnings. Another important aspect of the dividend policy is that we

must determine what the amount of earningsthat should be distributed to shareholders and

which amount we must kept in the firm .Indeed it can be a tough task for Mauritius as we have

just diversify into the Financial Sector .

Retained earnings are the most significant internal sources of financing the growth of the firm

whereas dividend constitutes the used of the firm funds.

From a shareholder point of view, dividends may be considered desirable because they tend to

increase their current wealth. Objective of a dividend policy accordingly should be to maximise a

shareholders return so that value of its investment is maximised. As the shareholders return

consists of 2 components:

Dividends

Capital Gains where Dividend policy has a direct influence .

.


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Black and Scholes(1974)

Black and Scholes (1974) views of dividend they argued that in equilibrium setting with the

taxes the supply of shares which have specific dividend yields will equal the demand for shares

with the same dividends. It can be seen as a clientele effect where it will prevent any

corporation from affecting the market price of the shares. This is done through manipulation of

the dividend yield. In(1978) Miller and they have again come with a new point that vehicles do

exist to compensate for the different taxes on dividend and capital gains . we can see the how

the irrelevancy of dividends applies here as dividends in valuation may even hold in a world with

taxes.

GRAHAM AND DODDs

Graham and Dodd (1969) argued that the sole purpose for the existence of the corporation is to

pay dividends and firms that normally pay higher dividends must sell their shares at higher

prices. in a perfect market, everything is perfect thus dividend policy has no effect on either the

price of a firms stock or its cost of capital, shareholders wealth is not affected by the dividend

decision and therefore they would be indifferent between dividends and capital gains.

Other different Views have been developed by bhattacharya (1979) ,Miller and Rock(1985) and

John and Williams (1985) suggest that firms change their dividend payout to signal future

performance . Since the management knows much more about its firm than outsiders so, the

only way for management to relay the information to the market is by changing their dividend

payout pattern . Many empirical studies have confirmed the theory. For example, Aharony and

Swary (1980) find that the market still reacts positively to the announcements even after

controlling the contemporaneous earnings announcements. Asquith and Mullins (1986)

investigated the first dividend announcement in the corporate history or dividend initiation after

10 year interval and find that the stock market reacts stronger to this type of extreme dividend

announcements. Healy and Palepu(1988) find similar evidence on the firms that initiate and omit

their dividend . The magnitude of negative stock market reaction is more severe on dividend

omission firms .Employing more samples size, Michaely et al.(1995) and robin(1998)they bothreached to the same conclusions. Docking and Koch (2005) find that stock market reaction to

dividend announcement is sensitive to the direction or volatility of the stock market . Agency

theory provides an alternative explanation of the market reaction to dividend announcements.

Easterbrook (1984) and Jensen (1986) suggest that dividend act as discipline tool to the

management.


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Both hypotheses imply that the stock market should react in the same direction as dividends

payment. If the market is efficient, then the subsequent operating performance should improve

.However, the evidence on the subsequent performace is mixed. These contradictory results

suggest that the evidence so far on the post operating performance of dividend paying firms is

inconclusive. Based on this reasoning the stock market reacts positively to announcements of a

dividend increase. Firms that tend to reduce their dividend payout the, stock market reacts

negatively on the chance that the management might invest in an unprofitable business.

Briston and Tomkins (1970)s

Briston and Tomkins (1970) agreed with Lintners conclusions when they studied the impact of

corporations tax on dividends where earnings rise, the increase tends to be shared between

retentions and dividends, with retention which tend to take the larger share.

Relevance School

Gordon and Lintner they didnt agree with Merton and Miller, as they said that dividends are less

risky than capital gains.

Gordon (1959)s

Gordon in his 1959 study found that the payout ratios and the price earnings ratios positively

they are related. They conclude that the causal mechanism was from Dividend to share value,that is high pay out meant high prices relating to current earnings .

Lintner 1956s study of Dividend Policy

Dividend as the main method of distributing cash to shareholders has received considerable

prior attention in the finance literature. Lintner (1956) suggest that firms prefer to smooth their

dividend and reluctant to change their payout policy . The management is reluctant to cut

dividend because it might send negative signal o investor and reluctant to increase payout for

fear that it might not sustainable in the future. Following this, many empirical studies have been

preformed and concentrated on how the stock market reacts to the announcements . Almost all

of the studies agree that dividend payout and stock market reaction move in the same direction.

That means Stock Market reacts positively on dividend increase announcement. Almost all of

the studies agree that dividend payout and stock market reaction move in the same direction.

That means stock market react positively on dividend increase announcement and negatively

on dividend decrease announcement. Two of the most widely discussed hypotheses on the


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stock market behaviour on dividend announcement are the information signalling hypothesis

and the free cash flow hypothesis.

Andrew P.Shepherd (1972)s

The effect of a firm's dividend policy on the current price of its shares is a matter of considerable

importance, not only to the corporate officials, who must set the policy, but to investors planning

portfolios and to economists seeking to understand and appraise the functioning of capital

markets. Do companies with generous distribution policies consistently sell at a premium over

those with small payments? Is the reverse ever true? If so, under what conditions? Is there an

optimum payment ratio or range of ratios that maximises the current worth of the shares?

Although these questions of fact have been the subject of many empirical studies in recent

years, no consensus has yet been achieved.

2.2 DIVIDEND POLICY: CONCEPTS AND TERMINOLOGY

Dividend policy may be defined as a trade off between retaining earnings on the one-hand and

paying out cash and issuing new shares normally the word dividends describe the periodic

payments which company make to service their equity capital. When we analylse a firm

dividend policy the key statistics is the payout ratio which is the proportion of distributable profit

actually distributed.

Dividend pay-out ratio= (Dividend per share /Earnings per share)

2.3-THE RELEVANCE SCHOOL

Relevance of DIVIDEND POLICY: Bird in- the- Hand theory

Gordon (1963) and Lintner(1962) disagreed with M&M ,arguing that dividends are less risky

than capital gains ,so a firm should set a high dividend payout ratio an offer a high dividend yield

to maximise its stock price . Merton and Miller called this the birdinthe- hand fallacy .The

fallacy is that cash (Non-Investment) which is preferable to investment .It actually ignores the

fact that the procedure for evaluating an investment takes account of the investment risk ,which

is independent of the source of finance.

Moreover, in some cases, the firm will be able to borrow at preferential rates and enjoy better

facilities. On the other hand, Bhattacharya (1979) explains that there is a certain level of risk

associated with dividends. This risk is based on the micro a macro environment of the firm; That


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is the business line the firm operates, the location of the business, labour power, human capital,

competitive forces etc. The risk adjusted discount rate takes into account this risk.

2.4 CLIENTELE EFFECT

The clientele effect is a theory which describes the intention of investors to invest in firms which

suits their factor endowment; among the most common ones is their tax circumstance. It can be

said that there is an inverse relationship between stock returns (Dividends) and tax levels. For

instance an investor in a high tax bracket would prefer to invest in stock giving a low rate of

return so as to pay less tax .on the other hand, an investor in a low tax bracket would definitely

invest in stocks with higher returns as he currently does not have large tax liability. Petit (1977)

showed that older investors (retired persons) were more likely to hold high dividend shares

because they pay lower income tax. In this case we call it the tax clientele effect. Hence the

clientele effect refers to firms making their dividend policy decisions based the customers they

would like to attach to themselves. (Litzenberger and Ramasawmy 1979).

Most firms do not behave in a manner completely consistent with theory. In fact firms appear to

have an overriding preference for stable, gradually increasing dividends, regardless of apparent

investment opportunities. The danger of such a policy is that companies with stable dividend

policy create a clientele which depends on dividend income to meet their living and operating

expenses. Because of the serious depressing effect on investors due to a dividend cut, directors

have to maintain stability of dividends during lean years even though financial prudence would

indicate elimination of dividends or a cut in it.

2.5 Earnings Theories

Many researchers are critical of dividend theories. In traditional earning theories, the market

price of a share depends on the company profits. Dividends have no effect on the share price.

Shareholders are presumed to be so traditional that, when the company keeps the profits and

does not pay dividends, they expect the firm to invest capital so that it gives at least their rate of

return. Dividend policy then does not affect the market price of the share.

3 Stock Market of Mauritius

The Stock Exchange of Mauritius Ltd (SEM) was incorporated in Mauritius on March 30, 1989

under the Stock Exchange Act 1988, as a private limited company responsible for the operation

and promotion of an efficient and regulated securities market in Mauritius. Since October 6th,


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2008, the SEM has become a public company, and throughout the coming years. SEM is today

one of the leading Exchanges in Africa and a member of the World Federation of Exchanges

(WFE).

The SEM operates two markets: the Official Market, the Development & Enterprise Market

(DEM). The Official Market started its operations in 1989 with five listed companies and a

market capitalisation of nearly USD 92 million. In Today Operations, there are 37 companies

listed on the Official Market representing a market capitalisation of nearly US$ 6,015.64 million

as at 28 February 2011. The DEM (Development and Enterprise Market) has been launched on

4 August 2006 and there are presently 50 companies listed on this market with a market

capitalisation of nearly US$ 1,851.96 million as at 28 February 2011.

The stock market was opened to foreign investors along with the lifting of exchange control in

1994. Foreign investors do not need to seek approval to trade their shares unless its purpose

was for the management control or anything with legal purpose or if its concerned with the

control of more than 15% in a sugar industry... Foreign investors also benefit from numerous

incentives such as revenue on sale of shares can be freely repatriated and there are no

withholding tax on dividends and no tax on capital gains.

Central Depository System (CDS) was implemented in January 1997 has brought about efficient

clearing and settlement of trades and at the same time reduced some of the inherent risks in the

process. CDS has the support of the Bank of Mauritius whch acts a as a clearing bank he

ensures delivery versus payment (DVP) on a T+3 rolling basis. The CDS also provides for a

Guarantee Fund Mechanism to guarantee settlement failures of participants.

SEM's Automated Trading System (SEMATS) was launched on 29th June 2001. It has an

electronic trading system built on third generation technology. SEMATS puts an end to

traditional trading patterns. . Trading in securities is conducted through dedicated trading

workstations located at intermediate dealers and linked by communication lines to the SEM

trading engine.

Treasury Bills trading on the market has been introduced by the SEM in December 2003, a first

step of a process aimed at the setting up of an active secondary market for governmentinstruments.

They attained Membership status of the World Federation of Exchanges (WFE) in November

2005whch also constituted an important milestone that has enabled the SEM to join the league

of stock exchanges that are compliant with the stringent standards and market principles

established by the WFE. SEM set up in 2006 the Development & Enterprise Market (DEM),


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which is a market designed for Small and Medium-sized Enterprises (SMEs) and newly set-up

companies which possess a sound business plan and demonstrate a good growth potential. It is

meant for companies wishing to avail themselves of the advantages and facilities provided by

an organised and regulated market to raise capital to fund their future growth, improve liquidity

in their shares, obtain an objective market valuation of their shares and enhance their overall

corporate image.With this membership all securities that are traded on the Stock Market wil

have to meet the HMRC interpretation.It also reinforces SEM attractiveness for the global funds

specilalizeez products .

Presently SEM is orienting its present activities and gradually moving away from an equity-

based domestic Exchange to a multi-product internationally oriented Exchange. In early 2010,

the SEM has brought some major changes to its Listing Rules to align them with the Collective

Investment Schemes Regulations 2008 with a view to positioning the SEM as an attractive

venue for the Listing of Global and Specialised Funds. Also some changes in the Listing Rules

so to attract the listing of Global and Specialised Funds on the Exchange which fits very well

with the strategic shift currently underway at the SEM. The Listing Rules has been made more

flexible to reflect the specific attributes and characteristics of the Specialised Funds it would like

to list on the SEM. Since the Month of March 2010 SEM been elected by the Cayman Islands

Monetary Authority(CIMA),which is an Approved Stock Exchange by virtue of its membership of

the World Federation of Exchanges . The purpose of this was for the CIMAs Mutual Funds Law,

Banks and Trust Companies Law etc..

This 31 January 2011, SEM has also been designated by the United Kingdoms Her Majestys

Revenue and Customs (HMRC), as a recognised Stock Exchange under section 1005 (1) (b)

Income Tax Act 2007. In the Board of the SEM, it shall not consist of not more than ten directors

and also at least two shall be members of the Industry; and

at least one shall be an Executive Director;

No person can be appointed as a Director without approval of the FSC accrording to section 24

of the Financial Services Act 2007

We have two Types of Market indices used, they are the following namely the Official MarketIndices and Development and Enterprise Market Indices.

3.1 Official Market Indices includes the following:

SEMDEX

SEMTRI


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SEM-7

Figure 3.1.1(a)

Figure 3.1.1(a) give you a clear idea how Semdex has evolves for the period 2010.

Development and Enterprise Market Indices include the following DEMEX DEMTRI. The Official

List-This is normally for the listed shares. There are around 40 Companies in this Market. The

Over-The Counter MarketThis is for the unlisted shares. This Market has nearly 80

Companies that are unlisted. Also, there are nearly 10 more companies which are cited for their

debentures in Mauritius Stock Exchange .Mauritius Stock Exchange has two dual listed funds

which can be cited both in London stock exchange and the stock Exchange of Mauritius.

Types of Companies enlisted in the Mauritius Stock Exchange and Turnover for year 2010:

Investment

Industries

Insurance and Banks

Hotels and Leisure

Transports

Sugar

Commerce

Nature of Trading

Open Claim

Order Driven

Single Price Auction System

Also some major developments which have taken place in Mauritius Stock Exchange:

A new Electronic Clearing and settlement system is being established

A daily trading system is introduced

3.2-SEM Mission


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The SEM is committed to becoming a World Class Stock Exchange. They will strive hard to

position the Exchange as a service-driven and operationally excellent organisation with world-

class trading and settlement capabilities, which incorporate and maintain the fundamental

principles of market integrity, investor protection and efficient price discovery.

3.3-General Listing Requirements

A company seeking a listing on the Official List of the Stock Exchange of Mauritius (SEM)

should:

Demonstrate an adequate trading record with published or filed accounts for the three years

preceding the application for listing;

Have an expected market capitalisation of not less than Rs 20 million; and

Issue at least 25% of the shares to the public, with a minimum of 200 shareholders, though thisthreshold may be phased in, with companies issuing 15% of their shares initially, increasing this

proportion to 20% within three years and 25% by the end of five years.

Other listing requirements such as submission of various documentation, which provide detailed

information on the company, how they must conform to the Rules and Regulations of the SEM,

and Listing Particulars to be issued to the public prior to the listing. The Listing Particulars must

contain all documents provided for in the Listing Rules for the investors to be reasonably well

informed about the securities quoted and the issuer, including the following:

The assets and liabilities of the issuer

The financial position of the issuer

The stated capital of the issuer

The profits and losses of the issuer

The directorship of the issuer

The rights attaching to the securities

The prospects of the issuer

3.4-History of FSC

It was established as the regulator for the non-Bank financial Services Sector under the

Financial Services Development Act 2001. Examples of these sector are : Stock Exchange


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Commission ,Insurance (Insurance Division of the Ministry of Economic Development .Financial

Services and Corporate Affairs and Global Business (MOBAA)

MOBAA stands for Mauritius Offshore Business Activities Authoritys regulates all these sectors

and supervises all their activities. Their non-Bank Financial Sector includes those companies

that are involve in Insurance &Pensions, Capital Markets Operations ,Leasing &Credit Finance

as well as Global Business activities .FSC strive to bring a sound ,stable and competitive

international financial services centre . FSC also ensures that there is transparency, fairness

and equity in the non-bank Financial Institutions and capital Markets ,while at the same time

they ensure the protection of investors that are involved.

Entities falling under non-bank financial institutions category are:

Insurance & re-insurance companies

Leasing companies

Credit finance companies

Market intermediaries: fund managers, portfolio managers, investment managers / asset

managers, custodians, brokers, investment advisers

Cooperative credit unions

4 METHODOLOGY

4.1 Introduction

The objective of this study is to find out the impact of dividend policy of the seven top

companies on the Stock Market of Mauritius and to find out how dividend price changes 15 days

before the final dividend date and 15 days after the final dividend were paid .The stock

exchange of Mauritius sets the background for this chapter which describes the data anaylsis

and interpretation of dividend, share prices of the seven listed companies and the market

capitalisation of the listed companies.

4.2- Objective

The data used in this study comprises of the seven top companies listed on the stock exchange

of Mauritius for the year 2010 in terms of their market capitalisation.

COMPANIES' PERFORMANCE IN 2010

TOP 10 COMPANIES YEAR 2010 : MARKET CAPITALISATION (Rs) YEAR END


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Rank

Securities

Rs Billion

%of Total Market Capitalisation

1

The Mauritius Commercial Bank Ltd

41.56

23.35

2

2 State Bank of Mauritius Ltd

27.49

15.44

3

3 New Mauritius Hotels Ltd

17.76

9.97

4

4 ENL Land Ltd

9.66

5.43

5

5 Harel Freres Ltd

8.45

4.75

6


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6 Rogers & Co. Ltd

7.38

4.15

7

7 Sun Resorts Ltd

6.35

3.57

8

8 Ireland Blyth Ltd

5.29

2.97

9

9 Omnicane Ltd

4.96

2.79

10

10 Promotion and Development

4.04

2.27

Source: Fact book 2010 (Sem)

Savannah Sugar Estates became ENL Land Ltd on 30th November 2010 as such data was not

available for this company thus it was disregard from the data.

Mon Tresor Mon Desert became Omnicane on 13th July 2009,thus some discrepancies about

the data,it was removed form the study .


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The date needed were extracted from many sources namely Fact book 2010 of SEM,as well as

database of one of the eleven stock broking companies namely State bank securities . Data for

foreign companies have been ignored in this study.

TOP 7 COMPANIES YEAR 2010 : TURNOVER (Rs)

Rank

Securities

% of Total Market Turnover

1


26.37

2

State Bank of Mauritius Ltd

9.37

3

New Mauritius Hotels Ltd

N/A

4

Harel Freres Ltd

N/A

5

Rogers & Co. Ltd

2.67

6

Sun Resorts Ltd

4.71

7


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Ireland Blyth Ltd

N/A

4.3 -The data collected on listed companies has been based upon :

Market capitalisation of the top seven companies on Stock Exchange.

Dividend paid on the official market for the period 2010 of the seven listed companies

Rank

Companies

Dividend Date

1


06-Jul-10

2


13-Sep-10

3


08-Oct-10

4

Harel Freres Ltd

08-Dec-10

5

Rogers & Co. Ltd

29-Sep-10

6

Sun Resorts Ltd


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01-Mar-10

7

Ireland Blyth Ltd

12-Jul-10

Data been taken date for 15 days before and after the dividend date ,unfortunately for some

companies there are some discrepancies as data are only for 12 days or 14 or some even for

11 day .The DPS also knows as the dividend per share is the amount of cash paid to

shareholders. EPS also knows as Earnings per Shares is the portion of a companys profit

allocated to each outstanding share of common stock and included in Appendix... It is normally

serves as an indicator of a companys profitability .Dividend Yieldnormally is the financial ratio.

4.4.1 History about the Seven Companies

Mauritius Commercial Bank

For Mauritius Commercial Bank the final dividend date on Stock Market of Mauritius was on 06

July 2010.

Mcb is known as the Mauritian bank, it is relatively well behaved with dividends earnings and

assets growth and without reserve accounting and extraordinary items adjustments. According

to the annual report of Mcb exchange rates around the world have grayed a lot in 2009 and

various periods of 2010 on account of heightened uncertainty levels and ever-changing signals

about the healthiness of the economic climate which led to a shift in the prices .


State bank of Mauritius (Sbm) is the second largest bank in Mauritius with a market share of

about 25% of domestic banking assets. It has 42 domestic branches, and three branches in

India. As per annual reports of Sbm total dividends payable for the year thus amounting to

Rs710 M. Total equity attributable to shareholders rose by 13.2 % to reach Rs14.7.The sbm

share price which was opened at Rs70 having already recovered 85.2% from the low of

Rs37.80 amidst high degree of risk aversion and uncharacteristic volatility in Financial Marketsworldwide.Rise and Fall in economic life have also impacted the share price.

Rogers & Co. Ltd

Rogers and Co Ltd operates in the financial services, Hotels, Leisure, Logistics, Property, Real

Estate, agricultural and travel and aviation sectors primarily in Mauritius. The company also

offers a range of financial services such as insurance ,Stockbroking,Factoring ,Consumer Credit


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,leasing .Rogers have a payout ratio that moved from 11.59 to 11.91 and their dividend per

share fell from 12.00 in 2009 to 9.00 in 2010 while their earnings per share 25.88 in 2009 to

24.61 in 2010.

Sun Resorts Ltd

Sun Resorts Mauritius is a major Mauritian hotel group that currently owns and manages five

resorts in Mauritius and in the Maldives - Le Touessrok, Long Beach, Sugar Beach Resort, La

Pirogue and Kanuhura in the Maldives.As we know last year in Sun Resorts financial

statements the profit before tax was Rs15, 102(Million), where they invest in many of their

companies abroad.

Ireland Blyth Ltd

Ireland Blyth Limited was incorporated as a private company on 14th July 1972 following the

merger of Blyth Brothers & Co. Ltd and Ireland Fraser & Co. Ltd, both of which had been trading

in Mauritius since the early nineteenth century.

Ireland Blyth Limited remained a private company until 1994 when it was converted into public

and was admitted on the Official List of the Stock Exchange of Mauritius. Ireland Blyth Limited is

one of the largest groups in Mauritius with activities in a wide range of sectors from financial

services, Aviation, Food storage, also in engineering Department.

Harel Frres

Harel Frres Limited (Harel Frres) is a conglomerate established in Mauritius and operating

regionally. Incorporated in July 1960, HFL is one of the major sugar groups in Mauritius,

cultivating some 6,000 hectares of sugar cane land in the northern part of the island. It has,

throughout the years, diversified its activities from an essentially sugar-oriented company to one

with interests in energy production, alcohol production and commercial distribution, property

development and construction as well as financial services.

Harel Frres is quoted on the Official List of the Stock Exchange of Mauritius and is on the

SEM7 list. Harel Frres has also expanded in Africa; it is present in the Ivory Coast through its

investment in two sugar factories and is also in Madagascar.

New Mauritius Hotels

New Mauritius Hotels Limited, with its subsidiaries they are engaged in the resort Hotel

business more precisely. They operates eight resort Hotels and an airline catering unit in

Mauritius .They also operates one hotel in the island of Seychelles, still under the beachcomber


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Brand . It also involved in other activities like Tour operations in France, the Europe and other

countries. Its location is situated in Curepipe.

5 Analysis

5.1.1Mauritius Commercial Bank

5.1.2State Bank of Mauritius

5.1.3Rogers Co Ltd

5.1.4Sun Resorts Ltd

5.1.5Ireland Blyth

5.1.6 Harel Frres.

5.1.7New Mauritius Hotels

Average Figures of the Seven Companies

Companies

Dividend Date

Before the Dividend Date

After the Dividend Date

% Change in Price

Mauritius Commercial Bank

06-Jul-10

140.75

138.81

1.38%

State Bank OF Mauritius

13-Sep-10

85.83

86.95

-1.30%


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08-Oct-10

102.18

109.1

-6.77%

Harel Frres Ltd

08-Dec-10

38.3

38.18

0.31%

Rogers and Co Ltd

29-Sep-10

269

268.9

0.04%

Sun Resorts

01-Mar-10

66.15

65.06

1.65%

Ireland Blyth

12-Jul-10

57.3

61

-6.46%


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6 Interpretation

Normally there are fifteen days gaps or less depending on the date set

Before = Share price @Dividend Date less Share price before dividend

After=Share price @Dividend dateShare Price after Dividend Date

*Figures I have used are the first date for the dividend before and for dividend after its the

figures with the last date.

Tendency of price before and after Dividend Date

Company




Harel Freres Ltd

Rogers & Co. Ltd

Sun Resorts Ltd

Ireland Blyth Ltd

Before

2

-1

3

0

13

-5.5

4

After

2


22/51

2

-7

0

3

-3

-2

Figure 5.1.1- we can see different trends for Mauritius Commercial Bank the average price are

constant before and after the dividend date .Mcb is considered to be the largest bank in

Mauritius yet before the dividend date there was different trends that was noted on the curve.

On 21 June 2010 the price was low but then it increased up till the next day of dividend date

where it makes a downward shift.

5.1.2 it began with a negative price but after the dividend date the price shift to a positive

one.Sbm began with a rise in price on the first date before the dividend date then it make no

movements where it remain constant but soon after the dividend date it makes different shifts

where the price at one time it increased or even fell down.

5.1.3-Before the dividend date the price was on average very high but after the dividend date

we can see a tremendous downward shift .We can see before the dividend date the price make

great progress beginning from 260 increased p to 273 but after the dividend date the price slows

down and make a downward pattern .

5.1.4-It began with negative figures but after the dividend date the price changes to a positive

one. Before the dividend date the price continuing on making a downward trend but soon after

the dividend date the price remain constant for one day then it make a upward trend up but still

the price didnt exceed the amount it was on 15 February 2010.

5.1.5 The figures was a positive one before the dividend date but after the dividend date the

average figures was a negative one .Before the dividend date again we can noticed how the

price gradually increased at low steps but from 07 July 2010 it make a good upward trend ,soonafter the dividend date the price continue on the same trends but this time it increased at high

speed.

5.1.6 Its quite a different pattern for Harel Frres. Before and after the dividend date the price

was on average 0.HF till the first date before the dividend the price as such didnt make a good


23/51

trend ,the price remain constantly between 38 and 38.5 ,but after nine days after dividend date

the price make a downward pattern.

5.1.7For it still began with positive figures but after the dividend date the price ends with

negative figures, NMH prices didnt increase much up to the first date before dividend date but

after the dividend date the price made a tremendous upward trend 111.As we can see 16 days

before the price was at 101.

7 Conclusion

We all know that Mauritius is an emerging market with its stock Exchange established less than

ten years ago. We have carried out a statistical analysis of past data compiling as from the final

dividend paid for the year 2010. The data was from the seven top companies listed on stock

market and it was taken based on their biggest market capitalisation. We have seen for the

different how the price changes drastically in some leading to a great fall and to others to agreat rise. There are some characteristics which are unique to Mauritius for example low

distribution in the ownership of shares which are responsible for a certain clientele effect that

could explained the difference in price shift in the market.

7.1-Recommendations for Further Study

Fact book 2010

History on Official Market of SEM.

History of Sbm Securities

8-Reference

Purmessur R.D;Boodhoo R.(2009) Signalling Power of Dividend on firms future Profits,

International Interdisciplinary Journey

Seppo .KDividend Puzzle, A review of Dividend Theories.

Merton H;Miller.K.R(1985)Dividend Policy under Assymetric Information,The Journal of

Finance ,Vol. 40,No.4.(Sep 1985),PP.1031-1051

Goliath Business Knowledge on Demand, Journal of International Finance and Economic, Jan

2007

Husam et al:Dividend Policy Areview of Theroies and Empirical Evidence,International Bulletin

of Business Administration ,2010

Stock Exchange of Mauritius


24/51

Economy Watch , Economy ,Investment and Finance Reports

Ohlson et al.2005 Dividend Policy Irrelevancy and the Construction of Earnings.

Azzopardi Franco(2004)Dividend Irrelevance and the Clientele Effect

Dalais.C (2009)Annual Report of Sun Resorts

Chukwuogor.C(2007) Stock Market Returns and Volatilities :A Global Comparison

Appendix

quoteDate1

companyCode

company

todayCPrice

DPS

23.11.2010

HARF.N0000

Harel Freres Ltd

38.5

0.7

24.11.2010

HARF.N0000

Harel Freres Ltd

38.5

0.7

25.11.2010

HARF.N0000

Harel Freres Ltd

38.5


25/51

0.7

26.11.2010

HARF.N0000

Harel Freres Ltd

38.5

0.7

29.11.2010

HARF.N0000

Harel Freres Ltd

38

0.7

30.11.2010

HARF.N0000

Harel Freres Ltd

38.1

0.7

01.12.2010

HARF.N0000

Harel Freres Ltd

38

0.7

02.12.2010

HARF.N0000

Harel Freres Ltd

38


26/51

0.7

03.12.2010

HARF.N0000

Harel Freres Ltd

38.5

0.7

06.12.2010

HARF.N0000

Harel Freres Ltd

38

0.7

07.12.2010

HARF.N0000

Harel Freres Ltd

38.7

0.7

08.12.2010

HARF.N0000

Harel Freres Ltd

38.50.7

09.12.2010

HARF.N0000

Harel Freres Ltd


27/51

37.8

0.7

10.12.2010

HARF.N0000

Harel Freres Ltd

38.3

0.7

13.12.2010

HARF.N0000

Harel Freres Ltd

38.3

0.7

14.12.2010

HARF.N0000

Harel Freres Ltd

38.5

0.7

15.12.2010

HARF.N0000

Harel Freres Ltd

38.5

0.7

16.12.2010

HARF.N0000

Harel Freres Ltd


28/51

38.6

0.7

17.12.2010

HARF.N0000

Harel Freres Ltd

38

0.7

20.12.2010

HARF.N0000

Harel Freres Ltd

38

0.7

21.12.2010

HARF.N0000

Harel Freres Ltd

37

0.7

22.12.2010

HARF.N0000

Harel Freres Ltd

38.5

0.7

23.12.2010

HARF.N0000

Harel Freres


29/51

38.5

0.7

Appendix

quoteDate1

companyCode

company

todayCPrice

DPS

21.06.2010

MCB.N0000

M C B

139

5.25

23.06.2010

MCB.N0000

M C B

141

5.25

24.06.2010

MCB.N0000

M C B

141

5.25

25.06.2010

MCB.N0000


30/51

M C B

142

5.25

29.06.2010

MCB.N0000

M C B

142

5.25

30.06.2010

MCB.N0000

M C B

142

5.25

01.07.2010

MCB.N0000

M C B

141

5.25

02.07.2010

MCB.N0000

M C B

140

5.25

05.07.2010

MCB.N0000


31/51

M C B

141

5.25

06.07.2010

MCB.N0000

M C B

141

5.25

07.07.2010

MCB.N0000

M C B

139

5.25

08.07.2010

MCB.N0000

M C B

138

5.25

09.07.2010

MCB.N0000

M C B

139

5.25

12.07.2010


32/51

MCB.N0000

M C B

138

5.25

13.07.2010

MCB.N0000

M C B

139

5.25

14.07.2010

MCB.N0000

M C B

139

5.25

15.07.2010

MCB.N0000

M C B

140

5.25

16.07.2010

MCB.N0000

M C B

139

5.25

19.07.2010


33/51

MCB.N0000

M C B

138

5.25

20.07.2010

MCB.N0000

M C B

139

5.25

21.07.2010

MCB.N0000

M C B

139

5.25

Appendix

quoteDate1

companyCode

company

todayCPrice

DPS

14.09.2010

ROGE.N0000

Rogers & Co. Ltd

260

9


34/51

15.09.2010

ROGE.N0000

Rogers & Co. Ltd

264

9

16.09.2010

ROGE.N0000

Rogers & Co. Ltd

266

9

17.09.2010

ROGE.N0000

Rogers & Co. Ltd

266

9

20.09.2010

ROGE.N0000

Rogers & Co. Ltd

268

9

21.09.2010

ROGE.N0000

Rogers & Co. Ltd

268

9


35/51

22.09.2010

ROGE.N0000

Rogers & Co. Ltd

273

9

23.09.2010

ROGE.N0000

Rogers & Co. Ltd

273

9

24.09.2010

ROGE.N0000

Rogers & Co. Ltd

273

9

27.09.2010

ROGE.N0000

Rogers & Co. Ltd

273

9

28.09.2010

ROGE.N0000

Rogers & Co. Ltd

275

9


36/51

29.09.2010

ROGE.N0000

Rogers & Co. Ltd

273

12

30.09.2010

ROGE.N0000

Rogers & Co. Ltd

273

12

01.10.2010

ROGE.N0000

Rogers & Co. Ltd

273

12

04.10.2010

ROGE.N0000

Rogers & Co. Ltd

270

12

05.10.2010

ROGE.N0000

Rogers & Co. Ltd

270

12


37/51

06.10.2010

ROGE.N0000

Rogers & Co. Ltd

267

12

07.10.2010

ROGE.N0000

Rogers & Co. Ltd

267

12

08.10.2010

ROGE.N0000

Rogers & Co. Ltd

267

12

11.10.2010

ROGE.N0000

Rogers & Co. Ltd

267

12

12.10.2010

ROGE.N0000

Rogers & Co. Ltd

267

12


38/51

13.10.2010

ROGE.N0000

Rogers & Co. Ltd

267

12

14.10.2010

ROGE.N0000

Rogers & Co.

270

12

Appendix

quoteDate1

companyCode

company

todayCPrice

DPS

30.08.2010

SBM.N0000


88

2.75

31.08.2010

SBM.N0000


87


39/51

2.75

01.09.2010

SBM.N0000


86.5

2.75

02.09.2010

SBM.N0000


85

2.75

03.09.2010

SBM.N0000


85

2.75

06.09.2010

SBM.N0000


85

2.75

07.09.2010

SBM.N0000


85


40/51

2.75

08.09.2010

SBM.N0000


85

2.75

09.09.2010

SBM.N0000


86

2.75

13.09.2010

SBM.N0000


87

2.75

14.09.2010

SBM.N0000


86

2.75

15.09.2010

SBM.N0000



41/51

87

2.75

16.09.2010

SBM.N0000


87

2.75

17.09.2010

SBM.N0000


88

2.75

20.09.2010

SBM.N0000


88

2.75

21.09.2010

SBM.N0000


88.5

2.75

22.09.2010

SBM.N0000



42/51

88

2.75

23.09.2010

SBM.N0000


88

2.75

24.09.2010

SBM.N0000


85.5

2.75

27.09.2010

SBM.N0000


85.5

2.75

28.09.2010

SBM.N0000


85

2.75

Appendix

quoteDate1

companyCode


43/51

company

todayCPrice

DPS

28.06.2010

IBL.N0000

Ireland Blyth

55.5

1

29.06.2010

IBL.N0000

Ireland Blyth

56.5

1

30.06.2010

IBL.N0000

Ireland Blyth

57

1

01.07.2010

IBL.N0000

Ireland Blyth

56

1

02.07.2010

IBL.N0000


44/51

Ireland Blyth

57

1

05.07.2010

IBL.N0000

Ireland Blyth

57

1

06.07.2010

IBL.N0000

Ireland Blyth

57.5

1

07.07.32010

IBL.N0000

Ireland Blyth

57.5

1

08.07.2010

IBL.N0000

Ireland Blyth

59

1

09.07.2010

IBL.N0000


45/51

Ireland Blyth

60

1

12.07.2010

IBL.N0000

Ireland Blyth

59.5

1

13.07.2010

IBL.N0000

Ireland Blyth

60

0.6

14.07.2010

IBL.N0000

Ireland Blyth

60.5

0.6

15.07.2010

IBL.N0000

Ireland Blyth

60.5


46/51

0.6

16.07.2010

IBL.N0000

Ireland Blyth

60.5

0.6

19.07.2010

IBL.N0000

Ireland Blyth

61

0.6

20.07.2010

IBL.N0000

Ireland Blyth

61.5

0.6

21.07.2010

IBL.N0000

Ireland Blyth

61.5

0.6

22.07.2010

IBL.N0000

Ireland Blyth

61


47/51

0.6

23.07.2010

IBL.N0000

Ireland Blyth

61.5

0.6

26.07.2010

IBL.N0000

Ireland Blyth

61.5

0.6

27.07.2010

IBL.N0000

Ireland Blyth

61.5

0.6

Appendix

quoteDate1

companyCode

company

todayCPrice

DPS

15.02.2010

SUNRESORTS.0000

SUNRESORTS


48/51

69.5

2.5

16.02.2010

SUNRESORTS.0000

SUNRESORTS

67

2.5

17.02.2010

SUNRESORTS.0000

SUNRESORTS

66

2.5

18.02.2010

SUNRESORTS.0000

SUNRESORTS

66

2.5

19.02.2010

SUNRESORTS.0000

SUNRESORTS

66

2.5

22.02.2010

SUNRESORTS.0000

SUNRESORTS


49/51


50/51

SUNRESORTS

64

2.5

02.03.2010

SUNRESORTS.0000

SUNRESORTS

62

1.1

03.03.2010

SUNRESORTS.0000

SUNRESORTS

62

1.1

04.03.2010

SUNRESORTS.0000

SUNRESORTS

63.5

1.1

05.03.2010

SUNRESORTS.0000

SUNRESORTS

63.5

1.1

08.03.2010


51/51

SUNRESORTS.0000

SUNRESORTS

64.5

1.1

09.03.2010

SUNRESORTS.0000

SUNRESORTS

66

1.1

10.03.2010

SUNRESORTS.0000

SUNRESORTS

69

1.1

11.03.2010

SUNRESORTS.0000

SUNRESORTS

68

1.1

15.03.2010

SUNRESORTS.0000

SUNRESORTS

67

1 1

The Impact of Dividend Announcement on Stock Market

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Transcript of The Impact of Dividend Announcement on Stock Market