Bank of Russia determines principles for public companies to set dividend policy
The Bank of Russia recommends that joint stock companies whose securities are publicly traded disclose information about dividend payment specifying the reasons behind such decision. The information should be clear and consistent, reads the information letter released by the Bank of Russia.
The conducted analysis of Russian companies’ corporate governance practices has identified that not all companies have an internal document stipulating their dividend policy. Also, charters’ general provisions usually do not contain approaches to calculating and paying dividends that investors need.
A transparent and clear dividend policy is a substantial factor impacting the value of a company’s securities and investment attractiveness. Retail investors pay particular attention to whether dividends are paid consistently as well as to the share of the net profit used for paying the dividends. This allows them to make conscious and prudent investment decisions and avoid spontaneous and thoughtless actions.
The Bank of Russia recommends that companies develop and approve dividend policies stipulating the procedure for determining the part of the net profit used for paying dividends, the procedure for calculating dividends as well as the minimum amount of dividends on shares of various categories. Companies should publish such document on their websites and timely update it to avoid misrepresentation of the securities’ market value.