BUSINESSMAN Henry Sy Sr. and his family and the Montinolas, along with the rest of the stockholders of Far Eastern University (FEU), received P700.3 million in cash dividends over the last two years. Based on some 13.7 million outstanding common shares, the dividend payouts entitled them to P50.86 per share which, at the present market price of P1,186 per share, translates to a 4.3-percent return over a two-year period.
Of course, that’s not how Mr. Sy, the patriarch of the SM Group of Companies, and Aurelio R. Montinola 3rd, chairman of the FEU board, would compute their earnings. But the numbers presented here are intended only for the public who may appreciate the earnings per share based on market value and not on par value.
Montinola, incidentally, is a former president of the Bank of Philippine Islands, the only BPI president who retired two years past the retirement age of 60. According to bank insiders, he got an extended term because of the bank’s profitable performance under his watch.
Recently, FEU posted on the website of the Philippine Stock Exchange the good news. Instead of cash, it declared a 20 percent stock dividend, computing the percentage as 2.75 million “number of shares to be issued.” To get the missing number, just multiply 2.75 million shares by 20 percent, and you will get 13.73 million. When you open www.pse.com.ph, you will find FEU’s posting of 16.47 million outstanding shares (2.74 million plus 13.73 million).
Due Diligencer made this presentation to show not only how profitable a school like FEU is but also to make the public aware of how a company uses its accumulated profits, which are pooled as an entry called retained earnings under equity in a company’s financial filing. As of June 30, 2014, FEU reported retained earnings of P3.65 billion.
With its continuing profitability, FEU sees brighter days ahead so that it has been preparing for expansion. An old posting showed it bought in 2013 a 1.6-hectare lot in Silang, Cavite for P40.1 million or P2,514 per square meter. At the same time, it subscribed to additional P130 million worth of shares in its unit East Asia Computer Center Inc. (EACCI) and paid 25 percent, which was equivalent to P32.5 million.
As FEU moves south, its stockholders could look forward to more dividends, what with its retained earnings of P3.65 billion. When the money equivalent of 2.75 million shares, which is worth P200.7 million, is deducted from this surplus, it still has P3.4 billion left for future dividends, possibly in the form of stock dividends, so that FEU could transfer more of its retained earnings to capital.
The question that may be asked is how to put value on FEU’s stock dividend. A filing on stock dividend usually comes in percentage. Since the amount is, more often than not, omitted, it is up to the public to make his own computation and draw his own conclusion on the tradability of the stock.
In the case of FEU’s latest 20 percent stock dividend, the stockholders would receive 2.75 million shares worth P200.7 million at par value. If the dividend were 20 percent cash, then each of them would get P20 for every share he or she holds. Since FEU had 13.73 million outstanding shares at the time of dividend declaration, then 20 percent of that would equal P274,626,060.
Now since it was a stock dividend that was declared, the 2.75 million shares multiplied by the stock’s last traded price of P1,186 on Tuesday equals P3.25 billion. To get the “return per share,” divide that figure by 13.73 million shares and you—and Due Diligencer—will arrive at P237.20 per share.
A 20-percent gain may not be bad at all for the Montinolas and the SM Group and the public stockholders who will receive their stock dividend starting today.