Global Rubber Industries (GRI), a significant shareholder of Ceylinco Insurance, states that the recent dividend announcement of Ceylinco Insurance is distorted and does not reflect the true value of return on equity to shareholders.
The shareholder points out that in spite of being the market leader for 11 consecutive years Ceylinco Insurance has had the lowest dividend pay-out ratio in comparison to other leading insurers listed on the Colombo Stock Exchange.
“It is also pertinent to point out that enumerating the dividend declared, as a percentage is no longer a valid statement, as under the new Companies Act of 2007, the concept of par value was withdrawn.
Therefore, Ceylinco Insurance PLC mentioning that dividends declared is ‘200 percent of the original share price’ is not only misleading and irrelevant but it is also a measure of performance that is obsolete in current-day context,” GRI said in a statement.
The shareholder pointed out that what is most important to investors and shareholders is the concept of dividend pay-out i.e. how much of one’s earnings have been paid out as dividends.
“In the case of Ceylinco Insurance PLC, this ratio is at 21 percent, which incidentally numbers the lowest amongst other listed insurance companies.
The dividend payment is also in stark contrast to the higher payments the directors have made to themselves. The other listed insurers’ dividend pay-out ranges from 34 percent to 69 percent for the year ended 2014.”
GRI stated that the dividend yield of Ceylinco Insurance is 1.5 percent and is the lowest compared to that of other listed insurers.
GRI has instituted litigation against the insurance company for mismanagement.
In its litigation GRI has argued amongst other things, that while the dividend payment is at the discretion of the management, any decrease in dividend due to mismanagement and/or unjust remuneration to directors is a violation of shareholder rights.
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