WHEN it comes to the distribution of cash dividend, the Philippine Long Distance Telephone Co. (PLDT) is, undoubtedly, the most generous. It is so generous that its previous year’s net profit would not be enough to cover the amount needed to meet the board’s generosity to its stockholders.
The regulators at the Securities and Exchange Commission need not worry about the “shortage” though. PLDT had the retained earnings to answer for it. Besides, a company does not violate any rule when it declares its annual net profits and retained earnings as dividend.
For instance, PLDT’s board approved the declaration of P63 and P48 per share dividend on March 6, 2012 payable on April 20, 2012 and P60 on August 7, 2012 payable on September 29, 2012. The company reported net income of P31.637 billion in 2011 to stockholders but paid its stockholders total cash dividends of P36.946 billion.
As of December 31, 2011, PLDT had retained earnings of P26.160 billion, which was more than enough to pay for the first two dividends of P25.062 billion on April 20, 2012.As PLDT sustains its profitability over the years, it has not deviated from its generous policy of distributing its retained earnings as cash dividends. Financial reports audited by SGV & Co. showed its net profits from 2010 to 2013 totaled P142.75 billion, a huge amount that went into its retained earnings and that strongly indicates PLDT’s ability to declare dividends.
Available postings on the website of the Philippine Stock Exchange do not show any sign that it was abandoning its cash dividend policy but it appears to have forgotten to reinvest its earnings by also declaring stock dividends.
Of course, there is nothing wrong with paying only cash dividends instead of stocks. The only downside to it is the repatriation by PLDT’s foreign stockholders of the returns they have been harvesting from their investments. Since foreigners control more than 53 percent of PLDT’s common shares, their dollar remittances to their home offices would mean a big drain on the country’s foreign exchange reserves.
Said foreign ownership does not include all the ownership of the Indonesian-controlled First Pacific Co. Ltd, which reported that its PLDT holdings are held for it by Filipino companies such as Philippine Telecommunications Corp. and Metro Pacific Resources Inc., which are both identified in ownership filings as “Philippine corporations.” These two First Pacific companies had, as of latest report, a total of 47.591 million PLDT common shares, or 22.05 percent. In addition, First Pacific indirectly owned 7.654 million American Depositary Receipts equivalent to 3.54 percent of PLDT’s outstanding common shares.
A recent filing showed PLDT paid P62 per share and P54 per share dividend on April 16, 2014. The two dividend payments totaled P25.062 billion. In addition, it will pay P69 per share dividend, or a total of P21.065 billion, on September 26, 2014. When added, the three dividend payments amount to P185 per share that would require the payment of P39.970 billion against net income of P35.453 billion in 2013.What do all these numbers tell the public?
The answers come from PLDT ownership filings. As Due Diligencer had counted more than 53 percent foreign ownership of PLDT common shares, it would be safe to presume that including First Pacific’s 22.05 percent holdings listed in the name of two “Philippine corporations,” foreigners’ control of PLDT’s common shares has topped 75 percent.
Apparently, the foreigners’ 75-percent control of PLDT’s common shares would be a big factor to consider in the value of the peso. Try computing the percentage against PLDT’s dividends such as follows: 75 percent of P39.970 billion dividend in 2014 equals P29.989 billion, or $697.151 million. Add to this the dollar equivalent of 75 percent of P36.946 billion equals P27.709 billion divided by P43 to a dollar equals $644.407 million.
The result of the computation shows a staggering $1.342 billion in what could have been a big boost to the economy if this had not been repatriated by PLDT’s foreign stockholders. But the huge dollar flight was expected as foreigners invest in listed stocks for profit. It necessarily follows that when they receive dividend earnings, they send these earnings home.
As for First Pacific’s 25.59 percent PLDT holdings, this would translate to total dividends of P10.228 billion, or $237.868 million in 2014 and P9.454 billion, or $219.872 million, in 2012. The Indonesians must be very happy that finally, it’s harvest time.