A SURVEY OF DIVIDEND POLICIES OF
LISTED COMPANIES IN HONG KONG
by
CHAN SHET HUNG, SUZANNE (陳雪紅）
MAYUKLUN (馬玉麟）
YUSAI HUNG (余世雄）
MBA PROJECT REPORT
Presented to
The Graduate School
In Partial Fulfilment
of the Requirements fof tjie Degree of
MASTER OF BUSINESS ADMINISTRATION
EXECUTIVE MBA PROGRAMME
THE CHINESE UNIVERSITY OF HONG KONG
May 1995
.
Y乙义1
l)
I
m z
ijMr^
P
21
JON ]m
m
^ ~ u n i v e r s i t y ' - / �
N ^ ^ L I B R A R Y SYSTEM
APPROVAL
Name: Chan Shet Hung, Suzanne
Ma Yuk Lim, Kevin
Yu Sai Hung, Peter
Degree: Master of Business Administration
Title of Project: A Survey of Dividend Policies of
Listed Companies in Hong Kong
(Dr. Dennis K.K. Fan)
Date Approved:/^
(p ^
/
/
••
11
TABLE OF CONTENTS
TABLE OF CONTENTS
ii
LIST OF ILLUSTRATIONS
iv
LIST OF TABLES
v
Chapter
I.
INTRODUCTION
1
II.
Objectives
Scope of Study
Literature Review
Methodology
Sources of Data
Statistical Measurement
1
2
3
6
6
6
CONCEPTUAL FRAMEWORK..
8
Regulatory Requirements for Dividend Payment
in Hong Kong
Other Factors Affecting Dividend Policies
Common Dividend Policies
High Dividend Payout Policy
Constant Payout Ratio Policy
Constant Dividend Payment Policy
Low Dividend Payout Policy
Residual/Passive Dividend Policy
8
9
10
10
11
12
12
13
•••
111
III.
FINDINGS AND ANALYSIS
Overall Trend
Economic Growth and Market Performance Trend
Earnings and Dividend Trend
Analysis By Industry: Finance and Banking
Industry Operating Environment
Earnings and Dividend
Industry Norm Dividend Policy
Analysis of Representative Company in Industry
Analysis By Industry: Property
Industry Operating Environment
Earnings and Dividend
Industry Norm Dividend Policy
Analysis of Representative Company in Industry
Analysis By Industry: Congomerate Enterprise
Industry Operating Environment
Earnings and Dividend
Industry Norm Dividend Policy
Analysis of Representative Company in Industry
Analysis By Industry: Industrial
Industrial Operating Environment
Earnings and Dividends
Industry Norm Dividend Policy
Analysis of Representative Company in Industry
Analysis By Industry: Hotel
Industry Operating Environment
Earnings and Dividends
Industry Norm Dividend Policy
Analysis of Representative Company in Industry
Analysis By Industry: Utilities
Industry Operating Environment
Earnings and Dividends
Industry Norm Dividend Policy
Analysis of Representative Company in Industry
IV.
CONCLUSIONS
Most Popular Dividend Policy
Statistical Analysis Result
14
14
14
15
16
16
17
19
19
22
22
23
24
25
28
28
29
29
30
33
33
34
35
36
38
39
34
41
42
44
44
45
47
48
50
50
53
iv
APPENDIX
55
BIBLIOGRAPHY
64
vii
LIST OF ILLUSTRATIONS
Illustration 1: Sector Performance - AOI General Vs Finance
18
Illustration 2: Sector Performance - AOI General Vs Properties
23
Illustration 3: Sector Performance - AOI General Vs Enterprise
29
Illustration 4: Sector Performance - AOI General Vs Industrial
34
Illustration 5: Sector Performance - AOI General Vs Hotel
40
Illustration 6: Sector Performance - AOI General Vs Utilities
46
vi
LIST OF TABLES
Table 1: HK Economic and Equity Market Trend 1989- 1993
15
Table 2: Overview of Earnings and Dividend of 194 Selected Company
16
Table 3: Earnings & Dividend Overview of the Selected Finance Company
18
Table 4: HSBC Holding Pic - Earnings and Dividend Summary
20
Table 5: Earnings & Dividend Overview of the Selected Property Company
24
Table 6: Sun Hung Kai Properties Ltd - Earnings & Dividend Summary
26
Table 7: Earnings & Dividend Overview of the Selected Enterprise Company ..... 30
Table 8: Hutchison Whampoa Limited - Earnings & Dividend Summary
32
Table 9: Earnings & Dividend Overview of the Selected Industrial Company … … 3 5
Table 10: Johnson Electrical Holdings Ltd - Earnings & Dividend Summary
……37
Table 11: Earnings & Dividend Overview of the Selected Hotel Summary
41
Table 12: Miramar Hotel & Investment Group Ltd
-Earnings & Dividend Summary
44
Table 13: Earnings & Dividend Overview of the Selected Utilities Company … … 4 7
Table 14: Hong Kong Telecommunication Ltd.
-Earnings & Dividend Company
49
Table 15: Dividend Policies Summary of 194 Selected Companies
50
Table 16: ANOVA Analysis on the Industry Dividend Payout Ratio
53
1
CHAPTER I
INTRODUCTION
Objectives
The objective of this project is to review the dividend policies adopted by listed
companies in Hong Kong over a 5-years period from 1 January 1989 to 31 December
1993 ("the review period"). Areas covered include a review of the overall dividend
payout trend over the review period, identification of the dividend policy most widely
adopted by listed companies in general and by type of industries, and a statistical
analysis
of whether there is significant difference in dividend payout ratio for
different kind of industries. The project will also attempt to explore the factors which
may have an impact on dividend policies adopted by listed companies of different
industries during the review period.
2
Scope of Study
As at 31 December 1993, there were a total of 489 companies listed on the Stock
Exchange of Hong Kong. By reference to the industry classification used for the
calculation of the All Ordinaries Index ("AOI"), listed companies are divided into 7
industry groups
( 1 ) 6 1 companies in the banking and finance industry;
(2) 11 companies in the utilities industry;
(3) 88 companies in the property related industry;
(4) 146 companies grouped under the category of conglomerate enterprises;
(5) 160 companies in the manufacturing industry;
(6) 15 companies in the hotel industry; and
(7) 8 companies unclassified and labelled as "miscellaneous".
As the companies which belong to the "miscellaneous" group represent only
0.3% of the total market capitalisation of the Hong Kong stock market as at 31
December 1993, and would unlikely have a dividend policy specific to this group,
they have beeii excluded from this survey. Furthermore, in order to observe a clearer
dividend trend or policy, this study has concentrated on those 194 listed companies
("selected companies") which have either 5 years of positive earnings or 5 years of
positive dividend payout during the review period.
The aggregated market
capitalisation of these selected companies represents 85% of the total Hong Kong
market capitalisation as at 31 December 1989.
Data collected from these 194 listed companies include earnings, dividend
3
payout, earnings per share, dividend per share and market capitalisation over the
review period. In addition, detailed analyses have been performed on a representative
company from each of the six industry groups as mentioned above. The chosen
company is one with the largest market capitalisation (as at 31 December 1993) in the
industry group and is one observed to have adopted the "industry norm dividend
policy" (as defined in Chapter II). The analyses cover their business performance,
gearing ratio, fund raising activities, and other company or industry specific factors
which may have an impact on the business and cash flow position of the company
during the review period.
Literature Review
Dividend policy is one of the most controversial subjects in financial analysis.
Previous research findings are non-conclusive and even contradictory.
The study of Dr John Lintner^ of Harvard University in 1956 revealed that
dividend payment was an active decision variable in most corporations and the
relationship between current earnings and the existing dividend rate was the most
important single factor in dividend decision. Two thirds of the corporations under his
study had a rather definite policy regarding the ideal target ratio of dividends to
current earnings. Although the target ratio would not be a restrictive requirement,
1 Lintner J. “ Distribution of Incomes of Corporations among Dividends, Retained Earnings and
Taxes", American Economic Review (May 1956): 97 - 113
4
corporations tend to move towards the ideal ratio over a longer period of time.
Modigliani and Miller^ in 1961 questioned the relevance of dividends and
argued that investors were merely interested in the total return of their investment.
They contended that a firm's value was determined by its investment or earning
power, not its financing arrangement. Thus, the shareholder's wealth should not be
affected by dividend policy at all.
Frank H Easterbrook^ introduced the agency-cost explanation of dividends in
1984. He observed that paying dividends forced firms to raise external capital more
frequently, subjecting them to monitoring and discipline by the capital market. Thus,
the transaction cost of paying out dividend and raising fresh capital may be viewed as
an "agency-cost" i.e., the cost paid by shareholders to counter check the power of
directors who are in fact the shareholders' agents in managing the company.
Jeffrey Bom and James N Rimbey4 in 1993 published the results of their test of
the Easterbrook hypothesis regarding dividend payments and agency costs. They
found that shares of growing firms that announced both financing and dividend
increases would rise more in value than shares of firms announcing a dividend
increase alone.
2 Miller, M. H. and Modigliani F.，“ Dividend Policy, Growth, and the Valuation of Shares", Journal of
Business (October 1961) : 411 - 433
3 Easterbrook, Frank. H, "Two Agency-Cost Explanations of Dividends", American Economic Review
(September 1984): 211 -230
4 Bom, Jeffrey A. & Rimbey, James N.，"A Test of the Easterbrook Hypothesis Regarding Dividend
Payments and Agency Costs", The Journal of Financial Research, Vol. XVI. No. 3 (Fall 1993):
251-260
5
Dr Ip Yiu Keung and Mr Ho Y. F. Peter^ of the Chinese University of Hong
Kong conducted a study of dividend policy of Hong Kong listed companies in 1988.
Their survey covered all Hong Kong listed companies over a period of 5 years from
1983 to 1987. They found that there was industry norm in respect of dividend policy
of specific industries since many financial managers would tend to follow the industry
leader in deciding dividend payout ratio.
Roger Henderson^ of Leeds Metropolitan University found that the dividend
payout ratio of UK listed companies was increasing.
Whereas in the 1980s, UK
companies were distributing between 20 and 25 of their after-tax earnings, this payout
ratio rose to more than 60 in 1992. Henderson provided a possible explanation to
such phenomenon. As pension funds matured, their liabilities had to be met more
from investment income (including dividend) than from pension contribution, a
situation compounded by an ageing society.
5 ip，Yiu-Keung & Ho, Peter Y F, "Dividend Policy in Hong Kong", The Securities Bulletin N. 36
(April 1989): 32-35
6 Henderson, Roger "Dividend Policy-Issues for the Board",Administrator (January 1995) : 30-32
6
Methodology
Sources of Data
The earnings and dividend data of the 194 listed companies during the review
period have been collected from published and unpublished sources including
Company Handbook - Hong Kong published by Corporate International Ltd., The
Securities Journal, and Hong Kong Economic Journal Monthly. Companies' annual
reports are another major source of data for analysis of the representative company in
each industry. Macro economic data are collected from statistics published by the
Census and Statistics Department and published research papers.
Statistical Measurement
Dividend payout ratio is being calculated for each of the 194 selected companies
for every year in the review period to observe the apparent dividend policy of each
company. Basically, five commonly adopted dividend policies were identified:
(1)
high dividend payout,
(2)
constant dividend ratio,
7
(3)
constant dividend payment,
(4)
low dividend payout, and
(5)
residual or passive dividend policy.
The meaning and definition of each policy is elaborated in Chapter II of this paper.
The second step is to find out the industry norm dividend policy of each of the
industries mentioned above. The dividend policy most widely adopted by the
companies in the industry will be regarded as the industry norm dividend policy.
To test whether there is significant difference in the dividend payout ratio
among different industry groups, the ANOVA analysis has been applied to each group
of data. Confidence level of 10% is used to test the hypothesis that "there is no
significant difference in the dividend payout ratio across industries".
A full financial analysis of each of the representative companies over the review
period is being conducted. Factors which may have specific impact on dividend
payout of the company such as financial performance, funding requirements of
business development plans, gearing ratio, the existence of an expressed dividend
policy and dividend forecast by company management in results announcements are
also analysed.
8
CHAPTER II
CONCEPTUAL FRAMEWORK
Regulatory Requirements for Dividend Payment in Hong Kong
Dividend is the most common form of distribution of earnings, current or
accumulated, by a company to its shareholders. Dividend can take the form of either
cash or stock dividend which is in fact a capitalisation of earnings. Other forms of
distribution include cash bonus payment which is a special form of dividend while
distribution in specie is a distribution of the company's assets to its shareholders.
Distribution of limited companies is governed by Part XIA of the Companies
Ordinance (Law of Hong Kong Chapter 32). According to the provisions of the
Companies Ordinance, dividend can only be made out of the company's profits
available for distribution, which means its accumulated, realised profits less
accumulated realised losses. Thus, a company is not allowed to distribute its current
year profit without making good its previous year losses.
Furthermore，unrealised
profits (e.g. property revaluation surplus) are not available for distribution.
In addition, a holding company can only distribute that part of consolidated profits
which have been repatriated from its subsidiaries. Therefore, the dividend policy of a
subsidiary may be affected by the dividend payout policy of its holding company.
9
Other Factors Affecting Dividend Policies
The macro-economic factors during 1989 to 1993 including the GDP growth,
inflation and interest rates in Hong Kong serve as the background in analysing the
overall trend of earnings, dividend payment of listed companies in Hong Kong and by
industry group. The impact of the stock market performance, overall and by industry,
is also reviewed.
Studies have indicated that taxation has an important influence on dividend
policy. This is particularly relevant in countries where the tax rate applicable to
dividend and long term capital gains is different. For instance, dividend income in the
hands of a US individual investor in 1994 can attract a maximum marginal tax rate of
39.6% whereas long term capital gains on disposal of shares are only taxed at a rate of
28%.
Thus, a US investor may prefer capital gains to dividend payment. The
influence of taxation should have less an impact on the Hong Kong companies
because dividend income in Hong Kong is non taxable and capital gain of long term
investment in equities is also tax free. Thus, from a Hong Kong tax point of view, an
investor should be neutral.
However, to the foreign investors (institutional or
individual) of Hong Kong equities, the tax implication of dividend payment in their
home base could be a relevant factor for their investment decision in a particular
stock.
10
Common Dividend Policies
Very few listed companies would spell out clearly their dividend policies.
However, based on the pattern of their dividend payments by reference to their
earnings over a period of time, it is possible to deduce the type of dividend policy
adopted by the company.
Apart from the extreme cases of full payout and full
retention, most companies are adopting one of the following common dividend
policies:-
High Dividend Payout Policy
Absolute full payout dividend policy (i.e., dividend payment equals to 100
percent of earnings) is rare. However, there are companies which constantly adopt
very high payout ratio. One typical example is the Cross Harbour Tunnel Co Ltd
which maintains a dividend payout ratio of over 80% each year. Since the company is
operating under a fixed term franchise, the company is not required to retain its
earnings for business development. Industries or companies which are dis-investing
would also make high dividend payment.
Occasionally，companies would make
special cash bonus to shareholders out of non-recurring profits for a particular year
apart from its normal dividend payment. For the purpose of this study, a company
with dividend payout ratio of 80% or above for any four years or three consecutive
years during the review period will be classified as adopting a high dividend payout
11
policy.
Constant Payout Ratio Policy
A study by Prof. John Lintner revealed that a lot of companies do have a longterm target payout ratio. Such financial management practice enables the company to
plan its capital growth and funding requirement. Although few companies would
expressly communicate their target dividend payout ratio to shareholders, it is not
uncommon for directors of Hong Kong listed companies to make broad forecast for
the earnings and dividend for the forthcoming year. For the purpose of this study,
companies with payout ratio varying within a range of 10 percentage points for any
four years or three consecutive years during the review period will be regarded as
having a constant payout ratio dividend policy.
Constant Dividend Payment Policy
The policy is usually adopted by companies at mature stage with stable earnings.
This type of companies tend to maintain a stable dividend per share ("DPS")
irrespective of the change in earnings from year to year. Constant dividend payment
policy is often associated with conservative management style. For the purpose of
6 See footnote 1
12
this study, companies with constant DPS within a 10% range for any four years or
three consecutive years during the review period will be regarded as having constant
dividend payment policy.
Low Dividend Payout Policy
Theoretically, dividend payments which involve administrative costs would
result in unnecessary dilution of shareholders' wealth. This is particularly so when
the company is having funding requirements at the same time. The OECD Financial
Statistics published by the US Federal Trade Commission^ revealed that internally
generated fund (i.e., earnings not distributed as dividend) had been the most preferred
source of financing. Thus, there are good reasons for a company, which has capital
expenditure needs, to adopt full retention or low payout dividend policy. This type of
policy is usually adopted by companies during its early growth stage as their
borrowing capability are limited and they have to rely heavily on internally generated
funding to finance business development. For the purpose of this study, a company
paying out less than 20% of its earnings as dividend is regarded as adopting the low
dividend payout policy.
7 Brealey,Richard A. and Myers, Stewart C. Principles of Corporate Finance 4th ed.
McGraw-Hill, Inc., 1991
New York:
13
Residual/Passive Dividend Policy
Residual dividend policy is usually regarded as "passive" dividend policy. The
dividend payment is determined only when all investments have been financed and
dependent on the availability of funds for distribution while any excess cash is
returned to shareholders via dividends.
This policy provides flexibility for the
financial manager in managing the cash flow of the company.
flexibility is usually not welcomed by investors.
However, such
For the purpose of this study,
companies with fluctuating dividend payout ratio and uneven dividend payments
during the review period would be regarded as adopting a passive/residual dividend
policy.
14
CHAPTER III
FINDINGS AND ANALYSIS
Overall Trend
Economic Growth and Market Performance Trend
During the review period, the Hong Kong economy experienced continuous
growth despite the set backs in 1989 following the June 4th incidence and the
austerity programme introduced by the Chinese government thereafter. The Hong
Kong stock market had completely recovered from the October 1987 crash and the
advancement escalated during the last two years (1992 and 1993) of the review
period. Hong Kong Dollar interest rate, which basically followed the US rates due to
the US$/HK$ peg, had been on the downward trend during most of the review period.
This was one of the major reasons for the skyrocketing of property prices during the
period. As property related companies made up of a substantial portion of listed
companies of the Hong Kong stock market, their exceptionally high earnings and
asset valuation gain were reflected in the market performance.
15
Table 1 shows the trend of the Hong Kong GDP growth, market interest rate
(average 3 month HIBOR) and stock market indices (Hang Seng Index, and AOI):-
"“
“
TABLE 1
HK Economic and Equity Market Trend 1989 -1993
—
19^
GDP growth rate
Inflation Rate
Averages-Month HIBOR
+/- pp over previous year
l60%
10.10%
9.70%
-
1990
3.40%
9.70%
8.73%
-0.97 pp
1991
5.10%
11.60%
6.27%
-2.46 pp
1992
6.30%
9.40%
5.80%
8.50%
4.04%
-2.23 pp
3.48%
-0.56 pp
Hang Seng Index
year end closing
+/- % over previous year
2,836.57
5.50%
3,024.55
6.60%
4,297.33
42.10%
5,512.39
28.30%
11,888.30
115.70%
All Ordinary Index
year end closing
+/- % over previous year
1,652.05
3.70%
1,715.55
3.80%
2,334.11
36.10%
2,951.06
26.40%
6,075.18
105-90%
Earnings and Dividend Trend
For the 1993 financial year end, total dividend payout of the 194 selected
companies amounted to HK$ 61,311 million, representing an increase of 25.49% over
1992 and 111.3% over 1989. An overall view of their total market capitalisation,
earnings and total dividend payout during each of the 5 years of the review period is
set out in the Table 2.
16
TABLE 2
“
Overview of Earnings and Dividend of 194 Selected Companies
Total Market
Capitalization at
year end (HK$ million)
+/- % over
previous year
Total Earning
of year (HKS million)
+/- % over
previous year
Total dividend
payout during
year (HKS million)
+/- % over
previous year
Average Dividend
Payout Ratio
1989
1990
542,328
580,655
1991
1992
19^
844,447~1,126,303~2,433,771
-
7.07%
45.43%
33.38%
116.08%
59,625
66,466
78,549
102,016
135,881
-
10.29%
15.38%
23.00%
24.92%
29,013
34,254
41,094
48,857
61,311
-
18.07%
19.97%
18.89%
25.49%
0.4412
0.6108
0.5829
0.6153
0.5006
Analysis By Industry : Finance and Banking
Industry Operating Environment
Within the 194 selected companies, 17 companies belong to the finance and
banking ("finance") industry. Total market capitalisation at the end of 1993 amounted
to HKS 427,945 million.
During the review period, the finance industry prospered
with the buoyant economy of Hong Kong. Financial institutions benefited from the
surging property market which underpinned financing demand from developers as
17
well as end users. Trade related financing also recorded healthy increase as the China
market further opened up. Consumer financing, including credit card business, being
one of the most lucrative markets, developed rapidly under the review period.
Earnings and Dividend
Under such a favourable operating environment, aggregate earnings of the 17
selected companies in this sector increased from HK$ 9,001 million for 1989 to
HK$33,821 million for 1993. The average compound growth rate in earnings of these
companies during the review period was 39.2 %.
Total dividend payment also
increased from HK$4,212 million in 1989 to HK$13,769 million in 1993. However,
the dividend payout ratio declined from 52% to 38% for the same period. Total
earnings, dividend, and market capitalisation of the 17 selected companies of the
finance industry are presented in Table 3.
18
““TABLES
Earnings and Dividend Overview of the Selected Finance Companies
1989
Total Market
Capitalization at
year end (HK $ million)
+/- % over
previous year
Total Earning
of year (HK$ million)
+/- % over
previous year
Total dividend
payout during
year (HK$ million)
+/- % over
previous year
Average Dividend
Payout Ratio
1990
82；3^
1991
19^
1993~
13^
141,497
232,721
462,191
-10.20%
91.46%
64.47%
98.60%
8,359
16,883
25,128
33,821
-7.68%
50.49%
32.81%
25.70%
4,769
8,369
10,280
13,769
-
13.22%
75.49%
22.83%
33.94%
0.5184
0.5573
0.4270
0.5781
0.3782
9,001
4,212
The price performance of listed companies in the finance sector reflected their
strong earnings growth. Comparing with the market, this sector outperformed the
market in 3 years out of the 5 years during review period. A chart showing the growth
of the AOI or the Hong Kong Index "(HKI)" general index and finance sectorial
index is set out in Illustration 1 for reference.
Dlustration 1:
Sector Performance - AOI General Vs Finance
140.00%
—
J
120.00%
十
100.00%
I
5
I
/
80.00%
60.00%
40.00%
M 20.00%
0.00%
-20.00%
女
——
——,/—
.^^―——
=_=
^
^
丨 寺 丨 I 丨 1 I
Dec-89
Pec=90
t-
—
—
I
Dec-91
— I , , F I N
_^AOI/HKI
—
1
Dec-92
Dec-93_
19
Industry Norm Dividend Policy
Of the 17 selected companies in the finance industry, it was observed that 10
companies representing 88% market capitalisation of this group as at 31 December
1993 adopted the constant payout ratio dividend policy.
2 companies adopted
constant dividend payment policy while the other 5 apparently adopted a passive or
residual dividend policy. For the purpose of this study, constant payout ratio is found
to be the industry norm. A full list of the 194 selected companies and their dividend
policy during the review period is set out in Appendix I.
Analysis of Representative Company in Industry
The HongKong and Shanghai Banking Corporation Limited ("HSBC") which
became HSBC Holdings Limited pic ("HSBH")(the holding company established for
the acquisition of Midland Bank in 1992), was chosen as the representative company
of the finance industry.
The earnings of HSBC reached HK$4,774 million in 1989 and then suffered a set
back in earnings for 1990 due to poor results of overseas operating units including
Marine Midland Bank and Hongkong Bank Australia. After acquiring Midland Bank,
the combined earnings reported in 1992 under the new holding company of HSBH
amounted to HK$14,321 million. Earnings further increased in 1993 to HK$20,624
million. A summary of its earnings and dividend payout for each year during the
20
review period is set out in Table 4.
TABLE 4
‘
HSBC Holdings pic - Earnings and Dividend Summary
“
T ^
Earnings (HK$ Million)
+A % over previous year
19^
im
11%
-35%
14,321
(11,407 excl
Midland)
83%
108%
20,624
44%
EPS (HK$)
+/-%over previous year
3.00
-
1.93
-36%
3.49
81%
7.28
109%
8.20
13%
Dividend payment (HK$ Million
+/-%over previous year
2,440
-
2,518
3%
3,013
20%
5,425
80%
7,588
40%
1.53
0.156
-90%
1.85
1086%
2.15
16%
3.92
82%
51%
81%
35%
39%
33%
6.5%
N.A.
9.6%
12.3%
7.4%
12.3%
7.9%
13.2%
DPS (HK$)
+/-% over previous year
Dividend payout ratio
Capital adequacy ratio
Tier 1
Overall
-
N.A.
N.A.
Source: HSBC Holding, Pic, Annual Reports 1989 - 1993
Dividend payout ratio of HSBC/HSBH ranged between 30% to 40% during the
last three years of the review period.
The set back in earnings coupled with a
moderate increase in DPS in 1990 pushed up the dividend payout ratio to 81%. As
disclosed in its Annual Report for the year ended 31 December 1990, HSBC had
maintained a dividend payment ratio of 45% to 55% during the 10 years between
1981 to 1990.
Based on the above findings, it was quite apparent that HSBH had adopted the
21
constant dividend ratio policy.
It was also observed that HSBH had lowered its
dividend payout ratio from around 50% during the 1980s to the more recent ratio of
30% to 40%.
There were no specific mention on dividend policy or the apparent change in
dividend payout ratio in HSBH's annual reports. The need to increase its capital base
to cater for business growth could be one of the major reasons.
Since the adoption of the capital adequacy requirement proposed by the Basle
Committee on Banking Regulations and Supervision Practice by most OECD
countries in the late 1980s (the requirement was adopted by the Hong Kong Monetary
Authority in 1989), banks are required to maintain a capital base of not less than 8%
of its total risk weighted assets. The "tier 1" capital (mainly equity capital and retained
earnings) should not be less than half of the total capital base. As a bank must provide
sufficient capital, from internal or external sources to support its growth in risk assets,
lower dividend payout ratio (i.e., higher retained earnings ratio) would increase the
bank's tier 1 capital base and strengthen its growth potential.
As at 31 December 1993, HSBH's capital to risk assets ratio was 13.2% (including
7.90/0 as tier 1 capital). During the year, HSBH issued subordinated loan capital of
£940 million which as admitted as "tier 2" capital to strengthen its capital base. To
reduce the burden of dividend payment, HSBH has provided an option for shareholder
to elect for scrip dividend instead of cash dividend for many years. In 1993, an
enhanced scrip dividend alternative was introduced whereby the scrip dividend would
be 50% higher than cash dividend to make this alternative more attractive. This was a
measure to increase its retained earnings and, improve its tier 1 capital.
22
Since 1993, HSBH a UK resident for tax purposes. Dividend payment in UK
will attract advance corporation tax. This may also have affected HSBH's dividend
policy.
Analysis By Industry: Property
Industry Operating Environment
Within the 194 selected companies, 57 belong to the property related industry.
As at the end of 1993, their total market capitalisation amounted to HK$794,595
million which had grown by 4.5 times over the 1989 year end figure. Such growth
benefited substantially from the increase in valuation of investment properties held by
these companies.
During the review period, residential property price of Hong Kong increased
from around HK$ 1,200 per square foot to HK$4,200 per square foot^
Escalating
property price during this period was attributable to a number of economic factors
which include the strictly limited land supply, persistent low interest rate, high
inflation, buoyant economic growth and increased per capita income.
The special market structure of the property industry also assisted in pushing up
property prices. Although there are numerous property developers in Hong Kong, the
market is dominated by less than ten big developers. With substantial market power
to control the number of flat units to be supplied, these large developers are in effect
6 Hang Seng Bank Ltd. Hang Seng Economic Monthly (July 1993) Hang Seng Bank
Ltd.
23
operating under an oligopoly environment.
Earnings and Dividend
Share price as measured by the HKI and AOI property sectorial index during the
review period fully reflected the outstanding performance of the property sector
shown in Illustration 2 the HKI/AOI property sectorial index outperformed the market
during the last 3 years of the review period.
Illustration 2:
Sector Performance - AOI General Vs Properties
160.00% 1
140.00%
, — —
120.00% I
O
召
^
/
画
％
80.00%
60.00%
40.00%
—
——
一
/
予
-f-
—
—
20.00%
0 . 0 0 %
I,~,PTY
——_^AOI/HKI
一
\——•
I
Dec-89
I
I
<
I
Dec-90
i
Dec-91
1
Dec-92
—
—
Dec-93
Performance of the property sector was supported by both increase in net asset
value of property companies as well as continuous increase in earnings. In 1989, total
earnings reported by the 57 selected property companies amounted to HK$ 17,951
million.
This figure increased to HK$45,983 million for the year 1993.
Total
dividend payment for 1993 amounted to HK$18,811 million (1989: HK$8,294
million). Average dividend payout ratio of these 57 companies ranged between 40%
24
to 50% during the review period (Table 5).
TABLE 5
"
Earnings and Dividend Overview of the Selected Property Companies
Total Market
Capitalization at
year end (HK$ Million)
+/- % over
previous year
Total Earning
of year (HK$ Million)
+/- % over
previous year
Total dividend
payout during
year (HK$ Million)
+/. o/�over
previous year
Average Dividend
Payout Ratio
u U ^
19%
19^
19^
~
151^
236,523
309,271
794,595
-
9.72%
50.37%
30.76%
156.92%
17,951
23,513
23,703
32,910
45,983
23.66%
0.80%
27.98%
28.43%
10,719
11,415
14,734
18,811
29.23%
6.50%
29.07%
27.67%
0.4767
0.4801
0.4647
0.4071
8,294
0.4821
Industry Norm Dividend Policy
By studying the dividend behaviour of the individual companies, it was found
that 24 companies representing 80% market capitalisation of the aforesaid 57 property
companies adopted a constant dividend ratio policy during the review period. For the
purpose of this study, maintaining a constant dividend ratio is regarded as the industry
norm for the property industry. The distribution of dividend policies among other
companies in this group are: 19 companies adopted a passive/residual dividend policy;
7 companies adopted a constant dividend payment policy; 2 companies adopted high
25
dividend payout policy; and 5 companies adopted low dividend payout policy.
Analysis of Representative Company in Industry
Sun Hung Kai Properties Ltd ("SHKP") was chosen as the representative
company of the property industry. SHKP was the largest property developer in Hong
Kong in terms of market capitalisation (HKS 150,929 million as at the end of 1993).
Riding on the property market boom during the review period, SHKP's earnings
grew from HK$2,020 million in 1989 to HK$6，692 million in 1993. Its asset base also
increased from HK$29,702 million to HK$67，128 million which was partly due to
the increase in property valuation. (The property revaluation surplus disclosed in its
published accounts for the year ended 30 June 1993 stood at HKS 11,677 million).
Apart from the favourable operating environment of the property industry during
the review period, SHKP's success was attributable to its policy to maintain a large
land bank sufficient for its development needs over a 4 to 5 years period.
Thus,
SHKP was able to contain its property development cost when land cost had been
escalating. In order to secure long term stable income source, it is SHKP's policy (as
stated in the Chairman's statement in the annual report for the year ended 30 June
1992) to derive a higher proportion of its operating profits from rental income.
Along with its earnings growth, SHKP's dividend payout increased from
HKS 1,059 million for 1989 to HK$2,716 million for 1993. The dividend payout ratio
ranged between 40% to 50%. However, it was noted that during the 4 years from
26
1990 to 1993，SHKP made cash bonus up to 20%
shareholders.
of annual dividend to its
Details of market capitalisation, earnings, dividend, and dividend
payout ratio of SHKP for each of the five years during the review period is set out in
Table 6.
“
TABLE 6
‘
Sun Hung Kai Properties Ltd - Earnings and Dividend Summary
1989
Earnings (HK$ Million)
2；020
+/-% over previous year
-
EPS (HK$)
^,692
43%
1.54
2.04
2.62
3.48
15%
32%
28%
33%
1,239
17%
1,720
39%
2,223
29%
2,716
22%
0.66
0.77
17%
0.96
25%
1.14
19%
1.4
23%
49%
50%
47%
44%
40%
241
0.15
259
0.15
288
0.15
581
0.3
Dividend payment (HK$ Million)
+/- % over previous year
1,059
-
-
_
4；^
40%
-
Cash bonus payment (HK$ Million)
Cash bonus per share (HK$)
3；350
1992
36%
1.34
Dividend payout ratio
1991
22%
+/-% over previous year
DPS
+/- % over previous year
1990
Source: Sun Hung Kai Properties Ltd., Annual Reports 1989 - 1993
The property industry required very substantial funding due to high land cost and the
long development cycle of properties for sale. However, SHKP did not rely heavily
on debt financing as its long term debt to equity ratio remained low at 12% to 17%
during the review period. This was not uncommon among large developers in Hong
27
Kong. According to the research by Solomon Brothers' in 1993, the average debt to
equity ratio of large developers in Hong Kong was as low as 11%.
With a solid financial position, SHKP would have no difficulties in obtaining
external financing at very competitive pricing. Bank borrowings could usually be
obtained at a margin above inter-bank market rates while lower cost of funds could be
obtained by issuing of debt securities.
SHKP's issued capital was enlarged by a major private placement of shares to
independent institutional investors in July 1992 and by the exercise of share warrants
issued as bonus to shareholders during the review period. Total funds obtained from
the aforesaid private placement amounted to HK$3,295 million, according to the
disclosure in its annual report for the year ended 30 June 1992，was applied for
business expansion into China. These fund raising activities did not seem to have
substantial impact on SHKP, dividend policy. Its dividend payout ratio of 44% in
1992 was in-line with that of previous years.
SHKP did not expressly mention its dividend policy in its formal communications
to shareholders. The only reference in its annual report was the usual remark in the
Chairman's statement: "Barring unforeseen circumstances, profit of the next financial
year will have satisfactory growth over the previous year and dividends will increase
accordingly". This may be interpreted as an indication that dividend payment would
increase in proportion to increase in earnings.
9 Lam Franklin and Kee George, “ Residential Property". Hong Kong Equity Research (September,
1993). Solomon Brothers.
28
However, based on its dividend behaviour, SHKP adopted a constant dividend
ratio policy consistently over the review period.
Instead of raising the normal
dividend payment, SHKP chose to pay special cash bonus and issue share warrants as
bonus to its shareholders during years of outstanding business performances.
Analysis By Industry : Conglomerate Enterprise
Industry Operating Environment
Of the 194 selected companies, 63 belong to the conglomerate enterprise industry
as categorised by the AOL Total market capitalisation at the end of 1993 was HK$
636,451 million.
This was the largest category in terms of number of companies and covered a wide
range of companies in different businesses. While it included large conglomerates
such as Jardine Matheson and Co. Limited, Hutchison Whampoa Limited and Swire
Pacific Limited, it also covered companies engaged in trades such as retailing,
airlines, shipping, newspaper publishing and broadcasting. Given the variety of lines
of business, the operating environment was largely influenced by the growth of the
29
Hong Kong economy and the opening up of mainland China.
Earnings and Dividend
The enterprise sectorial index under-performed the market in 3 out of the 5 years
during the review period. At the year end of 1993, the enterprise sectorial index
increased by over 100.1% as compared with the 134.47% in the overall market index.
The enterprise sector performance for the review period was charted in Illustration 3.
Illustration 3:
Sector Performance - AOI General Vs Enterprise
140.00% 1
120.00%
——
100.00%
P
——
I
80.00%
—
0
60.00%
—
1
40.00%
——
20.00%
0.00%
r-Bpar^
20 OQOO
/
Dec-89
^ ^ ^ z
I
Dec-90
_
I——‘
Dec-91
I,_,A0I/HKI|
,
FNJT
——
‘ 1
Dec-92
Dec-93
The aggregate earnings of these 63 companies increased from HK$ 19,267 million
for 1989 to HK$ 33,098 million for 1993. The average compound rate in earnings of
these companies during the review period was 11.5%.
30
Industry Norm Dividend Policy
Of the 63 selected companies in this category, it was observed that 28
companies representing 88.8% of the market capitalisation of this group adopted the
constant payout ratio dividend policy, 21 adopted a passive dividend policy, 7 adopted
the high payout ratio dividend policy and 7 adopted the constant dividend payment
policy.
Accordingly, constant payout ratio dividend policy is found to be the industry
norm for the purpose of this study. Total dividend payment also increased from HK$
8,511 million in 1989 to 15，185 million in 1993. The dividend payout ratio fluctuated
between 51% and 83% during the review period (Table 7).
“
“
TABLE 7
Earnings and Dividend Overview of the Selected Enterprise Companies
1990
Total Market
Capitalization at
year end (HK$ Million)
+/- % over
previous year
Total Earning
of year (HK$ Million)
+/- % over
previous year
Total dividend
payout during
year (HK$ Million)
+/- % over
previous year
Average Dividend
Payout Ratio
1991
19^
171,577
234,848
290,338
636,451
-
8.73%
36.88%
23.63%
119.21%
19,267
19,823
20,243
24,175
33,098
-
2.80%
2.07%
16.26%
26.96%
9,695
10,892
11,734
15，185
-
13.92%
12.34%
7.73%
29.41%
0.5055
0.8304
0.6943
0.7770
0.5215
157,802
8,511
31
Analysis of Representative Company in Industry
As one of Hong Kong's largest conglomerates, Hutchison Whompoa Limited (“
HW") was chosen as the representative company of the conglomerate enterprise
group. The company was engaged in several lines of business including property
development, trading, retailing, cargo handling, oil and gas, telecommunications, and
hotel business. During the review period, it completed the redevelopment and sale of
Hung Horn dockyard, the Whampoa Garden; it increased its stake in Hong Kong
International Limited, the world's largest private container terminal operator to 77%;
it ran Watson's, Park 'N Shop and Hong Kong Hilton; it also invested in Husky Oil
and Hong Kong Electric.
While 'retail, telecommunications, and other services' activities contributed 68%
of total turnover in 1993, These activities only contributed 15% of the total operating
profit in that year. The activities which contributed the most in terms of operating
profits were property development, 25% in 1993. Geographically, Hong Kong
attributes to more than 90% of its operating profits. A summary of HW's earnings,
dividend, and dividend payout ratio for each of the five years during the review period
was set out in Table 8 below.
32
TABLES
“
"“
Hutchison Whampoa Limited - Earnings and Dividend Summary
“
Earnings (HK$ Million)
+/- % over previous yr
EPS (HKS)
+/- % over previous yr
1989
DPS (HK$)
+/- % over previous year
-
19^
~
3^28
-5%
-8%
6,304
107%
1
1.16
16%
1.09
-6%
0.97
11%
1.8
86%
1,644
1,980
20%
2,073
5%
1,846
-11%
2,461
33%
0.54
0.65
20%
0.68
5%
0.55
-19%
0.68
24%
54%
51%
56%
48%
62%
43%
57%
31%
42%
29%
-
-
19^
3^519
16%
-
Dividend payment (HKS Million)
+/- % over previous year
Dividend payout ratio
Debt/Equity ratio
1990
Source: Hutchison Whampoa Limited, Annual Reports 1989 - 1993
Owing to the writing down of the investment in Husky Oil in 1991 and 1992,
HW's earnings dropped by 5% and 8% respectively. The growth in earnings of 101%
in 1993 was partly due to the fact that there was no exceptional item of similar nature.
If the writing down was extended, the increase in earnings in 1993 over 1992 was
about 23%.
The dividend payment of the company showed an upward trend during the
review period except for 1992 for which the earnings of the company dropped by 8%.
For that year, its dividend payment fell by 11 %
The company seems to maintain a relatively constant dividend payout ratio.
During the review period, HW kept a ratio between 54% to 62% for 4 out of the 5
years.
Thus, although the company did not indicate in its annual reports what
dividend policy it adopted, the pattern of the dividend payout indicates that it used a
33
constant dividend payout ratio policy. The dividend payout did not seem to tie to the
debt level of the company since while the debt equity ratio showed a downward trend
during the review period, the dividend payout remain relatively constant.
Analysis By Industry : Industrial
Industrial Operating Environment
40 out of the 194 selected companies belong to the industrial category as
classified by the AOL Total market capitalisation as of 31 December 1993 amounted
to HK$75,119 million.
During the period under review, the performance of the industrial sector was
influenced by the economic and political environment of Hong Kong and mainland
China. China's open door policy and the increasing operating costs in Hong Kong
continued to drive factories to move to mainland China. While cheap labour and land
costs across the border helped Hong Kong manufacturers to remain competitive, the
sector became more reliant on the economic and political scenes in China. This close
relationship can be seen from the fact that capitalisation of the sector dropped by
6.85% in 1990，the year following the 1989 Tiananman incident and that it grew by
27%-60% when the economies of Hong Kong and China picked up again in 1991 to
1993.
34
Earnings and Dividends
The aggregate earnings of these companies increased from HK$ 3,150 million for
1989 to HK$ 6,162 million for 1993. The annual compound growth rate in earnings
of these companies during the period is 18.3%.
The industrial sectorial index has under-performed the market in 4 of 5 years
the review period. At the year end of 1993, the industrial sectorial index increased by
over 56.50% as compared with the 134.47% in the overall market index. The
enterprise sector performance for the review period was charted in Illustration 4 for
reference.
Illustration 4:
Sector Performance - AOI General Vs Industrial
140.00%
j = j ~
120.00%
一
100.00%
—
I
80.00%
0
60.00%
1
40.00%
^
20.00%
—
—
^
一
|I=IA0I/HKI|
_ ind
——
^
0.00%
.20.00%
—
^
^
——r-m^
Peg 89
一
^
I
Dec-SJ
' ‘
Dec«92
Dec»93
Total dividend payment also increased from HK$ 1,730 million in 1989 to HK$
2,362 million in 1993. The dividend payment ratio was low in 1989，only 19%. It
increased to 48% in 1990 and fluctuated between 51% to 58% during 1991 to 1993
(Table 9).
35
TABLE 9
“
Earnings and Dividend Overview of the Selected Industrial Companies
1989
Total Market
Capitalization at
year end (HK$ Million)
+/- % over
previous year
Total Earning
of year (HK$ Million)
+/- % over
previous year
Total dividend
payout during
year (HK$ Million)
+/- % over
previous year
Average Dividend
Payout Ratio
1990
1991
1992
1993
30；903
28^14
36,470
47,020
75,119
-
-7.73%
27.90%
28.93%
59.76%
3,319
4,678
4,826
6,162
5.09%
29.05%
3.06%
21.69%
1,791
1,961
2,248
2,362
-
3.53%
9.47%
14.63%
5.08%
0.1873
0.4762
0.5788
0.5122
0.5676
3,150
1,730
Industry Norm Dividend Policy
Of the 40 companies in this sector, 14 representing 51.1% of the market
capitalisation as at December 31，1993 of this group adopted the constant payout ratio
policy, 20 adopted a passive dividend policy and 6 adopted the constant dividend
payment policy.
In view of the fact that the 20 companies which adopted the passive dividend
policy only constituted 31% of the sector's market capitalisation (as of December 31,
1993)，constant payout dividend policy is considered to be the industry norm for the
purpose of this study.
36
Analysis of Representative Company in Industry
Although Hong Kong Aircraft Engineering Co Ltd has the largest capitalisation
in the industrial sector classified by AOI, it was not chosen as the representative
company for the purpose of this study since a substantial part of its business was
related to the maintenance of the aircrafts of Cathy Pacific Airways, its holding
company. Instead, the second largest company in this group Johnson Electric
Holdings Limited ("JEH") was chosen.
JEH is the second largest independent manufacturer of micromotors in the world
in terms of turnover, and the company is the leader in the major market segments in
which it participates. JEH micromotors are used in household appliance, automobile
components and accessories, cordless tools，personal care items, leisure and hobby
products and business equipment and toys. It sells these products to customers in
over 20 countries. In 1993，sales in Hong Kong and China accounted for 39% of the
company's turnover and sales in Europe, North America and Asia Pacific accounted
for 27%, 24%, and 10% of such turnover respectively. Most of its customers in Asia
are manufacturers of products which are exported to the US, Europe, and other parts
of the world.
JEH's production facilities are centred in China, Thailand and Hong Kong. In
addition, it operates facilities for research and development, marketing and technical
support and production of high-precision components in Switzerland, Germany,
Japan, and the US. A summary of its earnings and payout for each of the years during
the review period is set out in Table 10 below.
37
Table 10
‘
•
Johnson Electric Holdings Ltd - Earnings and Dividend Summary
1989
1990
1991
19^
T ^
Earnings (HK$ Million)
+/' % over previous year
V72
10%
V73
0.40%
2 24
29.60%
283
26.50%
3 32
17.10%
EPS (HK$)
+/- % over previous year
0.51
-
0.51
0.40%
0.66
29.60%
0.83
26.50%
0.94
12%
Dividend payment (HK$ Million
+/- % over previous yr
61.6
-
61.6
0%
61.6
0%
74.5
21%
88.5
18.70%
0.18
0.18
0
0.18
0
0.22
21%
0.25
13.60%
36%
11%
36%
24%
28%
20%
26%
15%
27%
9%
DPS
+/- % over previous year
Dividend payout ratio
Debt/Equity ratio
-
Source: Johnson Electric Holding Ltd, Annual Reports 1989 - 1993
Possibly affected by the Tiannman incident, the earnings of the company for the
year ended March 1990 were stagnant and equalled to that of 1989. The results then
improved in 1991 to HK$224 million, an increase of almost 30%.
Thereafter,
earnings increased at a rate of 17% to 25%. In 1993，earnings amounted to HK$332
million.
The company had not indicated its dividend policy in its annual reports.
However, it can be observed that the company maintained a relatively content
dividend payment and constant dividend payout ratio. For the 3 years from 1989 to
1991, JEH paid a constant dividend of HK$61.6 million, and maintained a dividend
payout ratio of 36% for 1989 and 1990. For 1991 to 1993, the ratio was stable,
ranging between 26 % to 28%.
38
The company's debt to equity ratio increased from 17% in 1989 to 24% in 1990 as
a result of an increase in long term liabilities from HK$91 million in 1989 to HK$ 217
million in 1990. The finance was required for new production facilities in Thailand,
which was put into production in 1992. The long term liabilities gradually decreased
to HK$185 million in 1993，thereby decreasing the debt equity ratio to 9% in that
year.
It appeared that the dividend payout behaviour had not been affected by the profit
trend or the level of debt -- the dividend payout was the same in 1990 although there
was no increase in earning and there was a need for funding. Later when earnings
improved, dividend payment in 1991 remained the same as the previous two years. It
was not until 1992 that dividend payment started to increase but the ratio was kept at
a constant level of 26% to 28%. Based on its dividend behaviour, JEH has adopted a
constant dividend payout ratio policy.
Analysis By Industry iHotel
Industry Operating Environment
During the first two years of the review period, the hotel business was set back
by the Tianman incident and the Gulf war which dampened the tourist industry and
the consumer spending.
Tourist arrival had hardly recovered from the aftermath of
39
the aforesaid incidents when the US economy fell into recession in 1991 which was
later on spread to UK and Europe. Recovery of the US and Europe had not been on
a steady track until 1993.
Economic growth in East Asia region including Hong Kong remained buoyant. It
had mainly benefited from the speeding up of economic reform in China. Tourist and
business travelling within the region were on steady growth. However, the preference
of the Asian visitors were tourist class hotels instead of luxury class. Meanwhile, over
supply of hotel rooms with the completion of new hotels including luxury class hotels
like the Marriot, Conrad, Island Shangri-La, and tourist class hotels like the Panda,
Guangdong, put pressure on the hotel room occupancy as well as room rate.
Although the operating profit of companies engaged in hotel industry was
unsatisfactory during the review period, the value of their hotel properties increased
enormously. During the period from 1991 to 1993，commercial properties at prime
site locations such as Central, Queensway (where a lot of luxury hotels are situated)
increased significantly.
Earnings and Dividend
Notwithstanding the fair performance of the hotel industry, the share price of
hotel companies performed better than the market. The HKl/AOl Hotel sectorial
index out-performed the market in 4 out of 5 years (Illustrations 5). The share prices
of hotel companies in fact reflected the increase in property value of the hotels.
40
Dlustration 5:
Sector Performance - AOI General Vs Hotel
140.00% 1
120.00%
W
100.00%
—
y
——
——
I
肌叨％
—
^
60.00%
一
I
40.00%
子
“20.00%
0.00%
.20.00%
^
——=II
Deg-BU
UejL-gp
I -I
Dec-91
I^AOI/HKll
+HTL
—
—
' I
Dec-92
Dec-93
Due to the unfavourable operating environment as described above, total earnings
of the 9 companies in the hotel industry actually dropped from HK$ 1,768 million in
1989 to the lowest level of HKD 1,286 million in 1991. The total earnings for 1993 of
HK$ 1,563 million was still 11.6% below 1989. Nevertheless, total dividend payment
of these companies increased from HK$946 million in 1989 to HK$ 1,090 million in
1993. As a result, average dividend payout ratio was pushed up from 52.3% to 72.5%
(Table 11).
41
i
Table 11
1
I
“
—
Earnings and Dividend Overview of the Selected Hotel Companies
1989
Total Market
Capitalization at
year end (HKS Million)
+/- % over
previous year
Total Earning
of year (HK$ Million)
+/- % over
previous year
Total dividend
payout during
year (HKS Million)
+/- % over
previous year
Average Dividend
Payout Ratio
1990
1991
1992
~
17495
19,379
24,180
52,119
-7.70%
12.70%
24.77%
115.54%
1,562
1,286
1,427
1,563
-13.15%
-21.52%
9.88%
8.75%
950
972
982
1,090
-
0.42%
2.31%
0.96%
11.09%
0.5230
0.5917
0.7423
0.7099
0.7255
—
1,768
946
Industry Norm Dividend Policy
Based on dividend behaviour of the individual companies, it was observed that 5
companies adopted a high dividend payout policy.
These 5 companies made up
51.1% of the total market capitalisation of the industry total as at 31 December 1993.
Thus, high dividend payout policy is regarded as the industry norm. The second most
popular dividend policy of the hotel industry was constant payout ratio policy which
was adopted by 2 companies, while the remaining 2 companies adopted a passive
dividend policy.
42
Analysis of Representative Company in Industry
The company with the largest market capitalisation as at 31 December 1993
among the 9 companies in the hotel industry was The HongKong and Shanghai
Hotels, Limited.
However, this company did not adopt the industry norm dividend
policy (high dividend payout) during the review period. Thus, Miramar Hotel and
Investment Co., Ltd ("MHIL") which had the second largest market capitalisation and
adopted the industry norm dividend policy was chosen as the representative company
for this analysis.
MHIL owns and operates the Miramar Hotel situated at the business and tourist
shopping area at Tsimshatsui, Kowloon. The Miramar Hotel has around 540 rooms
and belongs to the low end of luxury class hotels.
MHIL also owned a large
portfolio of investment properties, including the Park Lane Square adjacent to the
Miramar Hotel with approximately 220,000 square feet of shopping arcade and office
space. Another 800,000 square feet of commercial and office space was added to
MHIL'S
portfolio when the commercial complex behind the Miramar Hotel was due
for completion in 1994. Apart from hotel operation, MHIL also engaged in the food
and beverage business and travel agency business.
During the review period, earnings of MHIL fell from HK$118 million for 1989
to the lowest level of HK$43 million for 1992. Moderate improvement was recorded
in 1993. By type of operations, hotel operation had been operating at net losses in 2
years (1991 and 1992) out of the 5 years under review. The majority of the operating
profits was from rental income which contributed 14% of the total turnover and 85%
,
.
43
of the pre-tax profits for 1993. Food and beverage and travel agency operations
together accounted for about 10% of profit contribution.
performance,
Despite poor operation
the value of MHIL's hotel properties and investment properties
appreciated substantially during the review period. The price performance and market
capitalisation of MHIL also went up with the Hong Kong stock market.
Notwithstanding the poor earnings performance, MHIL share price was in fact reflecting
the value of its property holdings.
Dividend payment of MHIL also fell from HK$129 million for 1989 to HK$55
million for 1993. However, dividend payout ratio remained high and ranged between
89% to 109%.
As mentioned above, high payout ratio was the norm for listed
companies in the hotel industry. Hotel is basically operated on cash basis which can
generate sufficient funds to meet its operating expenses including normal maintenance
and improvements. Major development plans are usually associated with building of a
new hotel or major renovation project. In the light of the scale of such development
projects, it would be difficult for them to be financed by current year earnings.
In MHIL's case, there was no major development project on the hotel operation
side during the review period. The development of the Kimberly Road commercial
complex, which was basically a property development project, was financed by a
syndication loan facility in the total amount of HK$800 million. According to general
accounting practice, interest incurred for property development was capitalised (i.e. not
charged against earnings). Thus, MHIL was able to opt for a high dividend payout
policy. An analysis of market capitalisation, earnings and dividend payout is set out in
Table 12.
44
Table 12
“
Miramar Hotel & Investment Group Ltd - Earnings and Dividend Summary
“
1990
Earnings (HK$ Million)
+/-% over previous year
-
EPS (HKS)
+/- % over previous year
-
Dividend payment (HKS Million)
+/-% over previous year
DPS
+/-% over previous year
Debt/Equity ratio
1993
101
-14%
71
-30%
43
-39%
61
42%
0.22
0.19
-14%
0.13
-32%
0.08
_38%
0.11
38%
129
90
-30%
80
-11%
43
-46%
55
28%
0.24
0.17
-29%
0.15
-12%
0.08
-47%
0.1
25%
109%
89%
113%
100%
90%
6.2%
4.4%
4.5%
13.5%
17.0%
-
Cash bonus payment (HKS Million
Cash bonus per share (HKS)
1992
118
-
Dividend payout ratio
1991
-
Source: Miramar Hotel & Investment Group Ltd. Annual Reports 1989 - 1993
Analysis By Industry： Utilities
Industry Operating Environment
Of the 194 selected companies, 8 belong to the utilities industry. Their total
market capitalisation as of 31 December 1993 amounted to HK$413,295 million. Due
to the nature of the industry, which requires heavy capital investment, some of the
companies in this group, such as Hong Kong Telecommunications Ltd. China Light
45
and Power Co” Limited and Hong Kong Electric limited, are among the largest listed
companies in Hong Kong.
Most of the companies under this category operated under special licence granted
by the Hong Kong Government.
Typically, a franchisee's price increase cannot
exceed a certain percentage on its capital assets. While this may seem to be restrictive
on the company's operating profits, the system in fact guarantees the franchisee's
return on capital. During the period under review, the utility industry prospered with
the growth of Hong Kong's economy and its increasing efforts in building up its
infrastructure.
Earnings and Dividends
Price performance as indicated by the Utilities sectorial index was below the
market in 3 out of 5 years. This was due to the fact that Utilities are usually regarded
as defence stocks which tend to under perform in a boom market (Illustration 6). The
favourable operating environment reflected in the aggregate earnings of these 8
companies the profits of which increased from HK$ 8,488 million in 1989 to
HK$15,253 million in 1993，an increase of 15.8% in terms of annual compound
growth rate in earnings during the review period.
The utilities sectorial index has under-performed the market in 3 out of the 5
years during the review period. At the year end of 1993, the utilities sectorial index
increased by over 83.95% as compared with the 134.47% in the overall market index.
46
The enterprise sector performance for the review period was charted in the Illustration
6 for reference.
Illustration 6:
Sector Performance - AOI General Vs Utilities
140.00%
120.00%
100.00%
I
0
1
——
—
80.00%
60.00%
40.00%
-20.00%
0.00%
.20.00%
—
-j-jjj-j
^
——^
rw.-RQ
m —
‘~"“i
npr-QO
“
Dec=aj
—
一
一
y Z
‘
‘
I ‘
11——lAOI/HKll
_ TTTT
—
‘I
Dfic=92
Dec=93__
Total dividend payment increased from HK$51,319 million in 1989 to HKS 10,093
million in 1993. Except for 1992, the dividend payout ratio for the industry between
1989 and 1993 was quite constant, ranging from the lowest of 61% in 1991 to the
higher of 67% in 1993.
For 1992, the ratio was 90% which to a large extent was
attributable to the 245% payout ratio of China Motor Bus, which made an
extraordinary profit from the sale of properties in North Point. If China Motor Bus
was excluded from the calculation, the average payout ratio for 1992 would be 67%,
which was in line with that of the review period (Table 13).
47
Table 13
‘
Earnings and Dividend Overview of the Selected Utilities Companies
1989
Total Market
Capitalization at
year end (HK$ Million)
+/- % over
previous year
Total Earning
of year (HK$ Million)
+/- % over
previous year
Total dividend
payout during
year (HK$ Million)
+/- % over
previous year
Average Dividend
Payout Ratio
1 0 ^
1990
1992
”""“
1324^
175,729
222,772
413,295
20.89%
32.96%
26.77%
85.52%
9,890
11,757
13,551
15,253
14.18%
15.88%
13.24%
11.16%
6,330
7,484
8,881
10,093
-
19.00%
18.25%
18.65%
13.66%
0.6570
0.6451
0.6100
0.9033
0.6739
8,488
5,319
Industrial Norm Dividend Policy
Of the 8 selected companies in this sector, it was observed that 5 companies
representing 97.8% of the market capitalisation as at 31 December 1993 of this group
adopted the constant payout ratio dividend policy. The policies adopted by the other 3
are: one with high payout ratio policy, one with constant dividend payment policy and
one with passive dividend policy. For the purpose of this study, constant payout ratio
was found to be the industry norm.
48
Analysis of Representative Company in Industry
Hong Kong Telecommunications Limited (‘‘ HKTL") was chosen as the
representative company of the utility industry. In terms of market capitalisation, it
was the second largest companies in Hong Kong (HK$ 181.8 billion as of 31
December 1993) and was the largest utility company in this category.
During the review period under Hong
Kong's growing prosperity and
involvement in the flourishing economy of China created a dynamic environment for
HKTL.
AS an international financial centre and the gateway to mainland China, the
growth of the demand for international telecommunication services has been
tremendous. For example, the incoming and outgoing international traffic increased
by over 26% in 1993 and 23% in 1992. The telephone traffic between Hong Kong
and China increased by over 35% a year for the 5 years. By 1993，China telephone
traffic accounted for more than 44 % of Hong Kong's international traffic.
The company is operating under a regulated environment. Its price increase is
governed by the scheme of price control agreed with the government. The scheme
introduced in 1993 restricted the increase in local charges to, on average, 4% lower
than the rate of inflation in Hong Kong. Local telephone services were provided by
HKTL on an exclusive basis until 1995. A summary ofHKTL's earnings, dividends,
and dividend payout ratio of HKTL for each of the five years under review is set out
in Table 14.
49
"““―Table 14
‘
Hong Kong Telecommunications Ltd.- Earnings and Dividend Summary
Earnings (HK$ Million)
+ / - % over previous year
EPS (HK$)
+/- % over previous year
Dividend payment (HK$ Million
+ / - % over previous year
DPS (HK$)
+ / - % over previous year
Dividend payout ratio
Debt/Equity ratio
19%
T^
17%
^
15%
^
14%
^ ^
13%
0.33
0.39
20%
0.45
16%
0.51
12%
0.58
13%
2,505
3,122
25%
3,680
18%
4,238
15%
4,840
14%
0.23
0.28
22%
0.33
18%
0.38
15%
0.43
13%
68%
0.4%
73%
3.0%
74%
3.0%
75%
2.0%
75%
0-0%
-
-
-
-
Source: Hong Kong Telecommunication Ltd, Annual Reports 1989 - 1993
Possibly due to the price control scheme and the gradual deregulation of the
industry, earnings of the company only increased steadily during the review period,
despite economies of Hong Kong and China were flourishing and the demand for
telecommunication services increased rapidly.
In fact, growth rate of earnings
reduced steadily from 17% in 1990 to 13% in 1993.
The growth rate of its EPS, DPS and dividend payment all fell from a rate of about
20% in 1990 to 13% in 1993，in line with earnings.
Its dividend payout ratio,
however, remained relatively constant. The rate was 68% in 1989 and rose to 73% in
1990, and remained steady in the following three years, ranging between 74% and
75%.
While the company had not indicated openly its dividend policy, it was
observed that the company adopted a constant payout ratio policy, which is typical to
the industry.
50
CHAPTER IV
Conclusions
Most Popular Dividend Policy
An overall view of the dividend policy adopted by the 194 selected companies
during the review period is set out in Table 15 below. Constant payout ratio was the
most popular dividend policy which was adopted by 83 companies (43% in number of
companies and 85% in market capitalisation as at 31 December 1993) during the review
period. This policy was also found to be the industry norm for 5 out of 6 industry
groups. As explained in Chapter III above, we regard constant payout ratio to be the
industry norm dividend policy of the Industrial group since the 14 companies in this
group which adopted constant payout ratio policy commanded 51% of the total market
capitalisation.
TABLE 1 5 " “
Dividend Policies Summary of 194 Selected Companies
~~Industries
Enterprise
Finance
Hotel
Industrial
Properties
High Div. Payout
7
7
2
6
1
5
2
Utilities
1
Total
15
Constant Div. Ratio Constant Div. Payout Low Dividend Payout Passive Div. Policy
-
28
10
2
M
.
5
21
5
2
20
19
1
5
"
1
23
83
5
^
51
68 listed companies (35% of total in terms of number of companies and 5% in terms
of market capitalisation) were apparently adopting a passive type of dividend policy.
Among industry groups, the percentage of companies adopting this policy ranged from
13% (Utilities group) to 50% (Industrial companies).
There were 23 companies (12% in terms of number of companies and 3% in terms
of market capitalisation) which adopted a constant dividend payment policy.
The
percentage of companies which paid relatively constant dividend per share among the 6
industry groups ranged between 11% to 15%.
High dividend payout policy was adopted by 15 companies representing 8% in
terms of number of companies and 2% in terms of market capitalisation of the total 194
selected companies.
This was also the industry norm dividend policy of the hotel
industry. It was noted no company in the Finance and Industrial groups adopted this
policy. Meanwhile, only 5 companies in the Properties group adopted the low dividend
payout policy representing 3% in terms of market capitalisation of the property group.
Based on the above analysis, we conclude that constant payout ratio was the policy
which was most widely adopted by listed companies in Hong Kong during the review
period. This is in line with Dr John Lintner" findings that a majority of corporations had
a rather definite policy regarding the ideal target ratio of dividends to current earnings.
Although such a policy was seldom expressly communicated to shareholders, it was
implied by the dividend behaviour of 83 out of 194 listed companies in Hong Kong
9 See footnote 1
52
during the review period. The company's wish to maintain a target dividend payout ratio
was eminent in one of the representative companies (Sun Hung Kai Properties Ltd)
chosen for detail analysis. In this case, we observed that the company had chosen to
make special nus in some years instead of raising the regular dividend payout ratio.
Funding requirements for business development did not appear to have significant
impact on the dividend policy of the representative companies. This was probably due
to the fact that most of these companies still had a lot of borrowing capacities as
evidenced by their low debt to equity ratio. In Hong Kong, well established listed
companies can obtain funding from bank loans or directly from the debt securities
market at very favourable terms and interest rates. Most of them are currently far below
their optimum debt to equity ratio (the point where additional borrowings will increase
the weighted cost of capital of the company).
However, funding requirements may have an impact on the dividend policy of
smaller or newly listed companies. In the absence of reliable performance record, bank
finance is more difficult to obtain. Thus, they may have to rely heavily on internal
funding to finance development projects in their growth stage. This may explain our
observation that the residual/passive dividend policy was more widely adopted by
companies with smaller market capitalisation.
The only industry group which had a dividend policy other than constant payout ratio
during the review period was the hotel industry group. This industry group adopted a
high dividend payout policy and the possible reasons were elaborated in Chapter III
above
53
Statistical Analysis Results
The statistical one-way ANOVA (Analysis of Variance) analysis was applied to
the dividend payout ratios of selected companies for the duration of the review period
to test for the significance of the difference in payout ratios among different
industries. The result of the analysis is tabulated in the Table 16 below. According to
the computed F value, the hypothesis that the dividend payout ratio of the six
industries were the same cannot be rejected, as four out of five times the F value was
close to 1 at the 10% level of significance.
“
Table 16
“
ANOVA Analysis on the Industry Payout
Industry Group
1989
Average Payout Ratio (%)
1990
1991
1992
1993
Enterprise
Finance & Banking
Hotel
Industrial
property
Utilities
50.55%
51.84%
52.30%
18.73%
48.21%
65.70%
83.04%
55.73%
59.17%
47.62%
47.67%
64.51%
69.43%
42.70%
74.23%
57.88%
48.01%
61.00%
77.70%
57.81%
70.99%
51.22%
46.47%
90.33%
52.15%
37.82%
72.55%
56.76%
40.71%
67.39%
F Statistic
p.Value
1.0257
0.4038
4.9129
0.0003
0.6432
0.6670
0.8288
0.5306
0.6301
0.6770
54
This analysis had provided an additional dimension to the understanding of the
dividend payout policy in the Hong Kong market. Based on the analysis, it could be
further interrupted that the dividend payment ratios of companies across different
industries were comparable, in addition to our findings that constant dividend payout
policy was the most popular dividend policy adopted by listed companies. This
phenomenon was probably due to the take off of the Hong Kong stock market during
the review period. Listed companies would be inclined to adopt comparable dividend
policy and payment ratio to maintain investors relationship.
55
APPENDIX I
Financial Ratios & Market Capitalisation Summaries of the 194 Selected Companies
J
CHEVALIER
i
丁
S
丁
^
i
S
i
•
—
-
f
AOI iDiv丨1 州
T
^
S
厕
H
P
�
-
则
-
i
‘
‘
—
-
^
r w
i
i
^
丨
T
—
^
R
^
-
0.150
0.040
M . C . P E P ^ - S P T
P
^
一
DPS
^
^
—0.137
0.070
動
793.66
0.293
0.436
0.220
0.070
0 .50
0.085
川.50
23.775.45
23 鄉
34.40%
|
麵
38.64%^^^^^
3 讓
63.36%^^^^
51.09%
62.21%^^
—丨 ON)
一
0.635
0.317
49.93%
.1,596.48
^
^
KINGFOOKHLTD
" T ^
KEESHING(H)LTO
MOTORH LTD
^
^
i
lKi51irf5
0
S
S
0
？
C
.
0
_
.
0.320
0
8
0
R
9
1
^
^
6
61.54%
4丨.90%
430.56'/.
322.82
,
5
8
(0.171)
丨,59丨.61 —
0.180
丨29’丨322.5 —
88.68% ,
0
598.06 -
3
0.063
0.080
0.965
0
0.024
0.020
0.200
0.070
0.060
1.699
76.92%
28.04%
32.67%
45.62%
62.50%
一
0.067
0.157
4.444
56，8丨2.00 一
^
1.009
0.180
5,869.68—
1.842.93 ~
.
0.055
0
1.459
,4.000
0.200
0.010 -2.72% 1,286.27 - 0.122 0.020
0
0.750
C 0 . 5 4 ,
.
^
P
R
^——iSTRfT^
—TJlARDINEMATHESONHLTD
—Tl7
li^lTITB
— . I ^ HWAKAY THAI H LTD
R
i S T ^ S 0 . 3 1 0
E
0
0
[
―
0
82.09%
6
0.270
0
56
(
4
7
)
0.463
^ - “ 0 . 1 1 1
0
29,463.00
-
_
0.044
：
4
0.150
0.090
^
0.020
0
0.090
0.015
0.309
0.200
^-"0.198 0.091
1387.51%j：!^—
32.83%
0
0 061
.
46,091.39
0
~ ^ ^ 0 . 5 2 0
16.39%
^
[ ^ 一
9
56.99%
3
44.44%
550
185.29%
.
36.92%
-丨 1.70%
_
4
38.46%
45.96%
55.56%
0
‘
_
-31.91%
2
-
32.79% ~
266.67% ~
/
.
5
—
%
�
—
2,151.85 "
5
—
~
9
.
1丨
.叨
0
0.480
0.040
0.076
3.536
—
0.025
1.111
0.309
0.200
0.007 0.064
2
~
0.560
^
2
%
匪
丨,064.86
32.89%
^
71.20%
35.71%
248.40
n’764.00
1.049.86
1,181.76
914.29% s l ^
48.39%
0040
0.099
0.105
1.130
。仰
0.063
0.950
0.309
0.200
0.055
0 120
0.090
» ’ 誦 。 . 之 卯
侧
286.51
0.650 — 56.03% 36.536.43
3
704.8»：^
。
4 4 ^
5
—
—
38.22%[
60.00%
32.m
50：^
17.70%
llu^
0 540
90.91%
594.00
508.95
2.16
15,270.00
1,212.12
2,451.58
233.63
54^
165.44
26,6
，
70.05‘ >.737.82
7
9 0 . 9 1 % ^ ^ ^ ^
iST""!0.470
丨7,324.35
HAWPARBROTHERl^j^
HOPHINGHLTD
- 4 1 HUTCHISON WHAMPOA LTD
49.52%
35.26% 1.M4.97 0.400 0.120 30.00% ^^^^68^
7
6
4
.
.
3H.S0
娜
ni.40 0.132 0.060 45.45% ^ ^ ^
嫌
873.69 0.280 0.040
1 僅 释 11
35.50%
63.25% 964.98 0 131 0.083
19,9二 1 .59 0.420
_
^
.
1卿
EPS
、
^
i
0.105
；；^ ^
CAP
86.42% 366.91 0.217 0.135
胸
i S T C “ s . 8 0 %
—
—
5
46B.04
一^
0.070
|
II,'•- Tilt-1 ‘ I iniaiiMiaiMtiBM
—I^TAREASTHINTLLTD
^
—
841.11
^
| 1謂 |
么
.it
*
^
：
,
i
•
—
^
一
f
^ ^ ^ ^ —
^ ^ ^ I g g
2M2% 4,隱
i S T R ^ I T T ^ 25.64-/. 1,390.00 — i ^ " ^ — l i ^ 0 . 0 5 0
53.76% 348.00 0 053 0.030 56.60% ^ ^
i S Y P 8 5 . 3 3 %
• 丨 — ~ ^ “ ^ — ^ ^ T T T 3 ? “ 0.023 0.011
151.68 0.101 0.067 66.34%^^^^^^
3
T
26.67%|
^
^
M . C , P
—
- n i DICKSONCONCEPTSdNT-DL^
- ^ WT ASIATIC CO (HK)LTD
E^ALENTCOLTD
43.93%
_
； ^ ^
|
i
‘
34.55% 17,223.83 —
^
—
^
^
"
.
0
.
2
2
%
^
PAYEUT
—
SCONSORTIUMINT-LLTD
i
]
^
^
_ ^
^
^lYir^XciFi^
i S f R 3 7 . 8 9 0 / . 46.131.28 - ^ - ^
� ^ M A R I N E RI N V ^ — — 丁
-TT^ COSMOS MACHINERYl^
i
S
T
^
0
-T^ CROCODILEOAR^^^i^
^
^
^
6
5
- 1 1 ? -DAIRYFARMINTLHLTT.
^
R
一
_
- I J
-^iBURwlLHLfD
CPPOKPHANDCOl^
-W
^XTSXT^X^Sl^XlS^^X^^I^^
丄
J
nnSE
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
-
Z
I
^
J
HKSE
rrrr^
^
^
11
花LUXHLTD—
S
S
T
^
_
T
^
r
R
f
^
s
‘
S
^
T
—
r
f
—
^
0
-
-
—
0
S
-
F
_
.
—
C
0
.
i
^
1
^
r
6
0
0
i
r
—
r
^
_
—
8
—
一
0
-
"
0
-
.
‘
-
.
—
―
^
6
l
.
i
_
^
i
0
3
3
,
。
^ ~ ~ S p S "
(Million)
~
，
1
0
9
72.12%
4
^
.
丽
9
57
測
8
.
^
_
^
1
.
删
^
1
0
0
0
l
‘
i
5
0.417
1
6
292+ 痛
0.085
— 0 . 1 2 8
8
sj 卜
9
^
—
5
H
—
4
0.600
|
o
3
3.40%|
21.74%
71.11%
%
明
r
—
"
56.070/.
-
.
3
.
4
^
麵
^
—
0.095
0.167
議
歸
0.800
DPS
0.00%[
60.15%
73.08%
75.56%
T
6007%
54.31%
则
讓
�
0.080 —
0.085
0,32
0.3M
0.600
0.800
0.167
3.034 | 0.000 |
0.124
225.9厂
0056
0.623
0.S50
0.423
0.117
,«34.73||
0.290
0.360
0.439 0.350
0.349
399.00
222.66
蘭
2’373-02
^
894.61
588.20
2.988.28
0.422
^
|
3
^
痛
爲
~
0.00%|
^
72.65%
57
細
^
2,582.77
川.90
^
^
^
^
_
^
^
^
^
^
277.03
^
^
2.501.26
^
30,20
3.213.03
15.243.2,
_
謂。1363.5,
^
5,3,/�
•
41.19%
^
_
篇
_
378.5,
0.00%__
85.31%
63
嶋
442.】％
3
758.67
_
^
MKT CAP
8 2 . 9 8 % _ _ ^
50.32%|
P»YOIIT
0
.
0
0
0
0.375
0.036
0.420
0.156
9002 0
0
.
0
9
0.592
�
0.950
DPS
| 0.780
)
雇
’
咖
EPS
二.哪
1
_
MKT CAP
測
0
50.31%
PAYOUT
—
3.448 I 0.000 I
—
i
_
2
丨.590
EPS"
1990
^
2,151.06||
,
(Million)
^ C
P；：；；^"""MKT CAP
M . C a p _ _ _ _ ^ ^ P.o.
RR-TT-
1991
1
9
9
1
5 5 . 0 5 % 1 . 0 7 0
-
T
5
0.150
噴
-
l
0
'
1
9
9
2
^
0
-
S
*
?
2
P
(
DPS P _ ^
1 1 ^ ^ ^
i
i
i
s
N
I
——iSr-T——3
r
R
i
i
^
iS^f^AI^Vr™
S
s
^
i
T
S
S
i
i
i
i
^
S
iS^ 丁
_
I
SHUNTAKHLT^
-SHO狐麵hlt5
PACIPICCONCORDHLTD
： _ _
—
AOI iDividendl 1993
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
l
™
^
i
HANGSENGBANKLTD
S
P
i
S
T
^
�
"
"
—
^
^
"
0
1.750 ‘
l
i
.
‘
R
^
S
9
2
5
i^OURCENTREDEVLTD
~
^
0.330
“
0
— I T
l
S
‘
C
^
2
0.160
E
^
^
i
2
STEH0.158
J
~
：
S
0
G R A N D HOTEL HLTO A
f
P
.
—T^
R
S
[
l
0
0.330
S
^
^
R
P
S f L S 5 ： ! ^
WINGLUNGBANKLTD
— ^
3.470
—FURAMAH0TELENTLT5
I^ONBANKOFHKLTD
^
- ^ P E R E G R I N E INVHLTD
™
F
F
MINXINHLTD
- ^ ^
1
-
-
T
^
"
.
"
‘
8
i
^
"
T
]
0
0
^
：
.
%
^
一
5
3,591.00
^
3
一
3,875.19 一
：
101.27%
84.83%
^
53.05%
^
2
1
.
4,453.74
S
^
9.40%
^
“
i
!
1.345 0.500
：
2.9,0
0.362
0.504
"丨3
0.153
0.362
0
7
^
0.387
0.160
0.300
0.150
1.399
0.220
0.300
0.525
0.030
P
7.280 2.150
l ^ i ： ^ “ ~ T i i r
“ 1 5 . 1 6 7 . 9 2
—
—
丽
厂
丨
™R^-T^iT-ii：?^!^?：^-
^
STRATEGIC職
T
丁
FiSR
^ ^ A H BANK LTD
- T i J
-^CHPLC
—TT
— ^ GUOCO GROUP LTD
?IRST SHANGHAI INVLTD
^
^
F
f
B A N K OF EAST ASIALTD
-VGMTRADINGLT5
-
^
l
S
-
_
P _
^
,
"
0
9
H
—
2
321,05丨
. 9 丨 I 0.769 _
^
79.79%
104.58%
82.87%
42.86%
48.08%
60.77%
59.52%
39.98%
23.62%
29.53%
;
^
“
»
一
0
4
73.47% 23,498.661
2.341
0.769 ^
2.272
0.341
0.975
0.096
^
0.944
0.200
0.4 丨
0.030
^
0.193
一。.棚
^ ^ ―
0.335
0.498
0.160
0.300
T：^— 0.290 0.140
924：^ —
1 ： ^ —
^ ^ 一
^
—
0.036
0.139
一
一
i
-
50.73%
3
.
"
^
^
^
^
—
144.37 -
i
-
_
0
^
0.020
^
— "
0.380
0
0
^
一
8
8
—
—
102.05%
82.90%
89.55%
—
^
—
7
T
—0.刚
.
丨,丨32.49 一
1.070.67 —
48.28% 1.02600
一
58.65%
—
—
0.032 —
—
6
.
0.380
TI^
^
9
0.150 ~
0
0.020
一
3
0.丨丨丨
3 1 . 2 5 % 0 . 0 7 3
"
25.90%
7
舰
^
丨00 00%
,
5
.
6
528.00
0
2
0.220
0-117
0.289
0.160
0.050
^
^
一
5
4
.
3
0.064
0 084
1,841.36 — f ^
430.83 — 0.152
1,022.19 — 0.277
1 , 0 0 0 . 6 7 ^ 丨 80
213.84
^
477.72
0.655
0.120
0.150
0.210
0.000
0086
0.000
‘
^
5
78.18%[
%
76.61%
1.533.0o|
857：^ —
1,014.80
0.778
8
5
0.558
.
丨
2,23.55
2,3.92
.3,760.28
州 i
一
^
^
^
155.70
^
19,975.35
^
^
^
^
44.02%
78.95%
54.15%
丨 16.67%
0.00%
％
71.72%丨
丨
^
^
^
^
2.060.64
~
1,522.50
800：^
1.042.72
1,017.00
~
丨
^
U60.59
^
-37.72./.___^
^
丨 雇
^
^
50.93% 42.660.39
%
^
64.36% ^^^
40.00%
^
2醒
4.035.84
^
55.05%__^
9 僅
麟
5..42%
22.54%
42.74%^^^
16.70%
32.89% 7 6 5 . 0 0 — 2 2 . 0 7 %
44)7%
2
~
62.76%
%
0.010
81.00% 30.420.52 2.998 1.527
27.40%
“
0 025
154.28 0 101 0.065
93.20
66.2丨％|
48 爲
一
0.435 1
0.898 0.150
0.457
—
DPS
| | 浏，
EPS
690 1.000
" ^
細
0.247
0.234
58.82% 750.46 0.545 0.300
.
9
MktC 叩
華..96020
^ ^ ^ ^
0-154 0.075
‘
‘
0
35.24% ^ ^ ： ！ ^ 一 “ ! ^ 丨.560
^
8
45.69%
―24.10%
0.197 0.090
^
0 4.7
側
。
T
i
0.822
0 侧
0
93.850.44 - 5.250 1.850
78,745.75 -
^
—
58
37.17%
45.18%
!
0
^
|
_on)
丨 | 1，卯丨
^
|
MM CP - — - D P T ^ ^
1州 |
M . C , p E P T - ^
.
O
S
VA0HANHKC0RPLT5
C
P
續讓.7.14%-T^--^-^
N
O
^^rS^O^lSf™
O
™
^
-
^
—
AOI I Dividend! »993
隱 0 肌 INVESTORS COPRT^
-TT^ CHINA.EASTERNrNVCO-I^
- ^ ^XHSINGPINANCIALHLTD
^
-
——
j'wHXl^Fn^
nnSFTl
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
^
mrLHU^
GRANDEHLTD
、
C
O
LTD
LAWS I N T L H L T D
L雇OON(HK)LTD —
�rXl^Ur^^^S^liSfTlS^^lTi^S
、！^l^I^iX^Xl^Ol^inS^yiTS
云脈HLTD
]I^^^^XSli^FnriYS"
1
^
I
i
R
^
^
l
I
T
P
^
^
o
i
丁
T
^
i
0
l
l
―
^
i
-
^
^
^
戲
^
-
.
-
O
^
。
S
i
W
-
。
^
i
1
^
^
‘
的
^
^
—
華
^
—
^
。
一
―
O
_
W
。
0.1.1
O
^
8
—
T
^
H
。
丨5
0.060
―
^
丨
工
，
i
；
0
^
]
^
^
—
二
^
^
^
一
f
蘭
。奶
0.080
0.020
(動n)
625.50
^
^
二
腳
^
59S.82
4丨 4 5 8 . 2 1
薩
30.59%
56,80
二
~
P
丁
P
5
P
5
^
0
—
^
.
P
―
―
3
3
7
5
-
1,954.431 |
9
2
—
0
—
I
N
5
P
0
.
1
I N 5 R 2 8 . 3 8 %
S
R
S
P
^
5
0
0.030
0
.
2
1
7
7
.
oi—0.080 |
.
5
3
2
3
4
.
9
6
.
.
0
0
59
31.13% 一
0.1523
0.122
1
丨
2
0.120
0
1
.7
0
0.250
/
4
丨’366.411 | 0.丨88 | 0.067 |
i：^—
6
6
.
7
7
%
l
：
^
— 0.110
0
8
-
35.64%|
0 9836 ~
154.55%
.
9
~
9
6
-
0
92丨.丨pj |
0
—
^
8
6
5
0
2
.
0
7
^
2
0.丨51 | 0.035 |
0
0
%
?
%
^
-
956.30
552.41
8
4
545.52[
837.38
丨,830.66
23.丨8%|
5
-55.56%
68.97%
0
2
242.96
—
—
—
2,703,3
丁‘ii"^"^""^"^Fi^^—MTJ酬0% 95,8
S
—
-li^r —
——二;
——瓦丁
-nrissxE^^
1
TS^^S^a^vf^lS^^^IfS——
-Ti^
OOLDPEAKINDO^
�^iSi^^XElEi^T^^^^I^^
f5uNTAINSHT(H)LTD
E L E C & E服
iT^Xi^^i^mS^IS
二
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
0.200
0.000
0.040
^
0.092
0.060
0.051
4
.
0.042
0.243
0.260
0.321
(0.001)
0.014
8
0
.
1
0
8
0 .40
0.250
0.010
0.020
0.063
1.489 0.740
0.,00
0
.
2
2
0
0.189
^
0.217
0 .83
0.351 0.150
0 033
0.in 0,65
04.5
0.218
3
^
^
^
^
^
4,01,71
^
404.39
丨
’
誦
33.33%[
^
44.44%
53,5%
•
251.78
^，啦：!!
1,204.82
2,335.83
,,065,0
- 1 0 0 0 . 0 0 % _ _ ^
3 隱 ^ ^ ^ ^ ^
職
3 3 . 3 3 % ^ ^ ^
4讓，2,35
_
_
_
3 2 . 7 9 % _ _ ^
42.800.^^^^
1 2 1 . 2 1 % ^
58.56%__^
^
_
403.20
48.19%^^^^^
0.00%
一
l ^ s i ^ o m ^ r s i f ^
HLT5
？
F
^
F
f
？
^
?
I
F
f
R
^
S
^
^
P
1
5
f
6
S
c
.
^
7
P
1993
C
2
6
V
P
R
P
^
f
?
R
P
f
^
I
^SEESTATEHLTO
r^UNGKONG(H)LTD
CENTURYCITYINT^LHLTT^
I
~ T l i l c m CHEUNG I N V C :
�
- T U
^XFS^uIT^iX^
Mssrau?!^^
i X S ^ T ^ i ^ l S f ^ I ^ ^
-^miEDPR0P(HK)LT5
^SIli^^SolJFI^
l^^rS^^I^iraiT^
、
誦
i ^ ^ S O ^ S f l i ™ ^
—
AOI I Dividend
.
p
^
i
^
—
0
.
^
S
5
0
0
‘
：
^
4
O
4
-
-
0
0
,
4
4
4,463.85 一
-
i
‘
0
—
—
—
5
P
.
O
-
丨
i
.
0
厂
9
3
“
T
i
T
—
P
9
^
"
27.03%|
^
l
"
"
—
-
6
60
^
S.SOi—
4丨’314.丨0
^
6
‘
-
^
3
m
_
(誦。n)
1 9 , 4 9 7 . 6 4 � . 0 0 % |
^
23.丨5% 丨 0 3 , 8 3 4 . 5 0 2 8 . 0 7 %
/
丨6.92%
%
%
5
7
rr^n
"
|
6
^
侧
^
―
：
0
.
r
^
0.027 -
^
0.240 | 0.050 |
?
_
^
i
8
‘
-
^
2 _ |
講
.
31.32%
^
―
2
70.76%
^
鎮
.
6
^
丨
^
3,195.98|
2
0
0
7
.9
145.27
644.92
9.559.0^
；
―
492.14
1
—
2
^
^
0.050
0.121
讓
8
~
—
3
0.108 [ 0.100 |
1
0.233
i
隱0
0 .3 0.ns
703.0 (0.036) 0.010
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
~
1
92.59%j
2
30.12%
52.17%
2 画
細 ％
25.09%
7讓
-2而
90.90
6
7
7
-
^
1.260
0 179
0.207
-
^
0.380
0.055
0.074
0.142
0.326
2,597.97j 卜 . 1 1 8 | 0.090 |
.
27,908.96
i
117.60
5
0.074
柳
0.095
0.221
0.340
1 ’ 讓
0.066
0-281
0.143
6,474.05
0.500
0.036
0.435
0.054
0.000
0,33
— 0.800
0.720
0.173
l,m.53
細
0.740
0.2M
582.00
彻
0.000
0068
1.862.44
聽
郷
_
^
885.00
_
3.2.48
^ ^ ^
21.206.41
76.27%|
3.381.88
41.67% ^ ^ ^ ^ ^ ^
30.16%
30.73%^^^^^
50.34%
6 8 . 4 0 % ^ ^ ^ ^
则 ％
, 錢
4.692.60
1,752,8
1,049.66
22.59%^^^^
78.65%
麟
46.15%
729.3% .,907.01
69.44%
21.050/.__^
58.78%^^^^^
25.23%
0
4 8 . . 5 % ^
舰
5
0-173
320.34
03.3
66.13%
画
.058%__^
L_
0.248 0-164
191.76 0.IS9 0.020
州一
簡
lkCHINALTD
丁
S
2
F
l
T
^
MINGLY CORP LTD
— ^
iCX^ATEINTLLTD
PALIBURGINTLHLT5
-lyy^iw^DDEVCOLTD
-
-^lAISUNDEVC^Ti^
lifHIN^BiVI^
6
^
-
.
^
？
—
P
—
—
^
^
^
F T ^ P •
？
n
丁
【
^
-
^
^
5
^
^
"
-
P
—
^
f
l
5
^
丁
l
^
%
-
^
^
Y
2
T
—
^
-
-
^ i ： ^
—
5
—^
™
0
^
^
！
^
:
"
7,176.59
!
"^i：!^ 一
；
18.07%
-
—
—
9
~
4
rrr-TT-
^
II 叫
_
%
jj^
3,50.09
_
Mkt Can
0.030
P
T
^
]
(
T
—
M
}
0.040
^
6
—
43.48%|
43.96%
99.04%
^
3
—
^
7 讓
—
61
.
,
一
0
1’945.76丨 |
丨
l
—
；
5 6
_
—
7
0
i
/
.
.
0.080
0
5
i
^
0
1.12�|�.3H
| )
0.257
0.05S
：
-
^
0.005
0
.
0
-
^
27.68%丨
31.13%
2
0
難
_
4.85%
—
—
應
4
-
3,211.621 |
工
i
^
0.070
0.6 丨
0.020
1.573 丨。.204 |
0.178
娜
2.400
^
細
,
一
_ —0 柳
i
-
_
1.404.^
—
—
-
n
^
—
sow.
騰
16%
_
.
0•彻
0.060
0.200
0.517
0425
004S 0.053
0.316
1
0.488 OIO
.O
0.110
.
1,471.32
丨_
9
—
鹏
0.144
0
1.09019 " T l 6 5
3.980
5
0.075
5
0 040
1.700
912.16 0.08, 0.040
0.917 0.190
S81.25
.
.
5
1,666.50
5
453,7
1,歸
21.501.86
...4000
3,34.0
3,47.70
363.22
Mkt Cap
丨 了
5
遍
.
⑶
膨^^
誦
5.500.20
%
20.75%丨
52.08%
6
24.24%
42.7.»/.
275.4T
1.408.40
3S6.23
丨 2,474.77
1,172.78
1.050.00
_ _ ^
493.8% 1,392.22
20.72%^^^
36
麟
82.21。/。
no.42%^^^28^
63.29%
鹏
204.9%
81.36%
54.55%
51,5%
0.270 OM
.O
_
28.9%
O.OM
0.3,2 0.0S8
—0.022
酬
0.6始 0.130
.53.99 0.410 0.100
4.937.19
2
細
1’誦
901.05
_
476.92
12.97%卜276.79丨丨。.241 j � . 0 5 � |
39.33%
;
17.39%
58.820/.
權
视
0.202 - 0 叫 娜
0.060
EPS DPS Payout
i r i
EPS DPS" Payout Mkt Cap
|丨1-|
‘ " ^ " ^ " ^ - " " T ^ i ： ； ^ ： ^ - ： ^ ^
.
~
2,982.32 — 0.091
^
—
^
P
R
i
F
6
—
"liT^^Xf^M^^I^S
i^lMS^TI^^
^
^
？
F
^
侧
一
—
i
i
^
AO 丨
—T4
-^li5PEWELLHLTD
、 ！
-^moHK^
—HKLAM.HLTD
- l ^
™
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
l^iXEW^oT?!^^
c � —
SU^GKAIPROPLTD
：
^
—
^
i
-
‘
.
—
i
"
^
5
—
— ^
—~6
15371^RBUSC0(1933)LTD
FERRY (H) CO LTD
I
"Ts：^^
U
O
m
T
：
E
f
R
P
“
r
R
?
l
^
r
丁
^
^
^
0.700
：
0.350
0.940
-
7
r
T
：
5
p
R
^
i
- •
,
-i
•
-
^
^
—
4
R
4
64.概
56.29%
.
。
4
鄉
2,525.82 一
丨
^
�
1.510
^
65,155.77 "
35,92丨.25
T
U T L R 5 2 . 5 4 %
I
0
^
f
0
i
--T
"
R
^
c
R
^
F
i
ii=r
r
/
‘
0
0.哪
—
0
0.275
�
0.380
0.820
-
u ^ r - s r ^ ^ - ^ i T ^ - v ^ ^
？
l
C
D
丽LECTRICHLTD
HA REALTY COLTD
P
f
？
F
^
AOI 1 — 1 .993
^
、
- ^ W A H
-^^SHATSUIPROPLTD
AN CHINA I N V C ^
-^^RNPROPCOLTD
-^TaISANOLANDDE^
—T^
—^TrNOLANDCOLTD
SOUTH SEADVCOl^
:
nn^
|
4
"
^
一
q
^
-
~
丨
.
I
一
I
0.1.0
H
％
7 _ |
雇
6
54.30%
62
T
—
^
47.48%
T
29 施
.
0.090
5
•
一
0.033
•
0.241
一
4
3,59—
81.820/.—iOJ
U60
“
7
^
"
！
^
^
50爲
%
"
78麗丨
隱
0.700 一60.34%
‘
-
!
^
i
^
100,0
8
1.97. 83
i
^
垂
0.241
l
0.245
~
EPS OPS
11 1 卿
0.010
0.010
0.120
0.241
0.262
0.080
0.240 0.120
0.0,0
0 009
0.809
0.660
0.770
_
11’戲
_
7
2
0.284
.
3
6
0.130
U 蘭 i . e s
1.289
丨0.3�..cos
0.500
1.017.90
藝
98.78
之’丨蘭
230.96
1,362.88
丨.340
7 8 . 7 9 % 卜 2 6 0 . 3 8 ! 丨 0.633 | 0 . 彻 丨
^
45.480/0
5 痛
观
53.19%
0.000
o.ooo
0.090
3,388.74 0.252 0.100
0)55
讓
0.0
.3.50
謹
0.260
945.63
^ I ： ^
薦
—
^
0.156
•
f
%
—
0
M吻
73爲 1’細 _ 0545
t
64.29%
3’丨28.2�|| 0 . 6 6 � | 0 . 5 2 � 丨
988.M
27.678.59
^
鹏
0
90.26%
0
| 40M
.%
一
I
聽0,20 0,00
j 0.740 丨 0 . 5 8 � |
»07.624.3. —
.
iT：?!^"
20,534.丨8
^
54,743.04—1^^
—
-
0
0
0
丨
M.C.P
DPS
(
M
i
—
^"Z^tZ^Z!!!
M.C.P
^
4 8 . 1 6 0 / . 硕 - 0 . 2 6 7
t
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
_
_
^
^
680.M
1.556.20
20.020.52
^
_
_
^
隱
卿
�
�
75.叫
68,1%
/
64.54%
45.77-/.
8隱
914.94
2.785.11
59.073.7i
—
'4,234.18
9.308.10
i,834.25
講 。 U 0 5 . 8 0
4
__^
3 0 . 5 3 % ^
_
50.00% 2,08.31
277.47
I U . 1 1 % ^ ^ ^ ^ ^
29.06%
29.79%
49.25%
�
_
_
3,509 .3
28.33% ^
肩
^
^
100.00%
_
U96.73
3 4 . 6 2 % ^ ^ ^ ^
狐
_
C.
)
二
C - Constant Dividend Payment
R - Constant Dividend Ratio
H - High Dividend Payout
L - Low Dividend Payout
P - Residual/Passive Dividend Policy
ENT - Enterprise
FIN - Finance & Banking
IND - Industrial
PTY-Properties
HTL - Hotel
UTL - Utilities
Dividend Policies:
AOI Sector.
Footnotes:
%
63
APPENDIX I: Financial Ratios and Market Capitalization Summaries of the 194 Selected Companies
64
BIBLIOGRAPHY
Books
Corporate International Ltd. Company Handbook - Hong Kong. Hong Kong:
Corporate International Ltd, 1994.
Brealey, Richard A. And Myers, Stewart C. Principles of Corporate Finance. 4th ed.
New York: McGraw-Hill, Inc., 1991.
Prinches, George E. Essentials of Financial Management. 3rd. New York: Harpa &
Row, 1990.
L c 丫 A n H T ^ n h i n
n^vid S. Statistics For Management. 5th ed. New
Jersey: Prentice Hall International Inc., 1991.
65
Census and Statistics Department. Honp: Kong Annual Digest of Statistics. 1989 to
1993. Hong Kong: Census and Statistics Department.
Company Ordinances (Law of Hong Kong, Chapter 32)
Inland Revenue Ordinance (Law of Hong Kong, Chapter 112)
Banking Ordinance (Law of Hong Kong, Chapter 155)
Periodicals
The Hong Kong and Shanghai Banking Corporation. Annual Reports. 1989 to 1991.
The HSBC Holdings, pic. Annual Reports. 1992 to 1993.
Sun Hung Kai properties Ltd. Annual Reports. 1989 to 1993 •
Hutchison Whampoa Ltd. Annual Reports. 1989 to 1993
Johnson Electric holdings Ltd. Annual Reports. 1989 to 1993
Miramar Hotel Investment Group Ltd. Annual Reports. 1989 to 1993
66
Hong Kong Telecommunications Ltd. Annual Reports. 1989 to 1993
The Securities Journal (February 1989 to February 1994)
Hong Kong Economic Journal Monthly (February 1989 to February 1994)
Lintner J. "Distribution of Incomes of Corporations among Dividends, Retained
Earnings and Taxes", American Economic Review (May 1956): 97-113
Miller, M. H. and Modigliani F.，"Dividend Policy, Growth, and the Valuation of
Shares”, Journal of Business (October 1961): 411-433
Easterbrook, Frank. H, “Two Agency-Cost Explanations of Dividends”, American
Economic Review (September 1984): 211-230
Bom, Jeffrey A. & Rimbey，James N., “A Test of the Easterbrook Hypothesis
Regarding Dividend Payments and Agency Costs", The Journal of Financial
Research, Vol. XVI. No. 3 (Fall 1993): 251-260
Ip, Yiu-Keung & Ho，Peter Y F，"Dividend Policy in Hong Kong”, The Securities
Bulletin N. (April 1989): 32-35
Henderson, Roger "Dividend Policy-Issues for the Board", Administrator (January
1995): 30-32
67
Lam Franklin and Kee，George "Residential Property". Hong Kong Equity Research
(September 1993). Solomon Bothers.
Hang Seng Bank Ltd. Hang Seng Economic Monthly (July 1993).
Hang Seng Bank Ltd.
,
.
.‘：^
.
“ Y
I
r
>
•、： ：
：
/
-
. . ----
-
.
.
.
.
r .
： •
_
、
-
,
“
：
V
,
‘
.
.
-
fi
.
.
.
.
-
.
：1
.
,
.
r
..
-
-
“
,,
-
--
.
.、
.
•
、 、 .
„
,
.
•
、.
.
.
-
,
1
>
.
.
.、
J
*
.
,
• . .
. .
.
.
.
-
.
•
.
.
.
V
.
,
.
.
1
.
i.
、：.
.
.
.
,
1P-.
•
•
/
•-
.1
•』
.
.
•
•
•
V
•
..
.
•“ •
.
1
.
‘
->-
•
.
,->-.
-c
- .
.
•
‘
1 .
！
4
.
.
.
滅
I" . . . . .
•
•
•
.
.
.
-,
ff -.
..
.
,
.
——
.
.
_
,
-
I
.
•
-
. i
.
.
.
•
:•
,
：
：
.
；.
.
^
•
.
.
.
.
.
.
•
.
.
-
：
-
.
•
國
EEThEiDDD
圓
1
1
1
1
1
1
saLJBjqin >H
| 门3
1