What determines size of dividend cheque?

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Apr 10, 2017
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By Staff Reporter.

Saccos that want to meet the capital adequacy requirements may opt out of paying high dividends and instead put their surplus into retained earnings.
Members of a Sacco usually get acrimonious when directors declare dividends that are not impressive. Directors usually recommend unfavourable dividend payout when the surplus declines or that most of the surplus has been invested in ventures that will realise good returns in the future.
“Directors of Deposit-Taking Saccos are not required to declare dividends, based on any extraordinary items that are different from profits generated in the Society’s ordinary course of business normal operations,” said Charles Omwansa, CEO Gusii Mwalimu Sacco Limited.
Omwansa said that after a Sacco has prepared its financial statements, these documents are presented to external auditors for their opinion. These financial statements are then presented to the Sacco Societies Regulatory Authority (SASRA) for their verification.
“It is when these two processes are complete that the said Sacco can then issue a notice to members concerning the next annual delegates meeting. It is at this meeting that members will pass resolutions on the dividend payout before it can then be paid into their accounts,” said Omwansa.
Dividends were defined as payments made per share which also includes interest on members deposits, to the Sacco shareholders by the Sacco, based on the surplus of the year, but not necessarily all of the surplus, as recommended by the directors and voted at the Saccos Annual Delegates Meeting (ADM).The annual dividend provides the shareholder with a return on the shareholding investment.
ADMs usually get stormy when size of the dividend cheque shrinks with members fiercely engaging the Sacco’s directors. This is because members see an increase in dividends as a sign that the Society is performing well while a decrease as a sign of decreased profitability.
Directors are also under pressure to please members and therefore pay dividends that are at par with other players in the industry for the members to continue being proud to be associated with the Sacco and for the directors to retain their positions on the board.

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