SMC shares at P88 disappoint market investors

Emeterio Sd. Perez

Emeterio Sd. Perez

IF you bought common shares of San Miguel Corp. at the stock’s high of P88, then you would have earned just 0.4 percent per quarter, or 1.6 percent a year based on SMC’s regular dividend of P0.35 per share per quarter.

Now you know why SMC shares have not been doing well in the market. Who would remain loyal to a stock that gives only P0.35 per share every three months or P1.40 a year, thus frustrating the stockholders, particularly the public who are in the market for dividends?

On September 18, 2014, SMC posted on the website of the Philippine Stock Exchange (PSE) the third quarterly P0.35 per share dividend for 2014. Computed at 2.4 billion outstanding common shares, the dividends would amount to P832.3 million per quarter or P3.3 billion a year.

As investors, you deserve more.

Such a low return on your investments could be the reason why SMC has not been performing well in the market. But there is something more in this that market investors have failed to see—the financials behind it.

In a posting on the PSE website, SMC reported more current assets amounting to P479.1 billion against current liabilities of P303.5 billion as of June 30, 2014. It said its net income in the first half surged to P18.4 billion from P2.9 billion in the same period in 2013. Sales in the first six months increased 13 percent to P404.7 billion from P358 billion previously.

These financials may be impressive and should have driven up the price of SMC’s common shares. But they did not. Last Friday, SMC shares closed at P78.25, which would probably not please businessman Henry Sy Sr., who owns Sysmart Corp.

Sysmart holds 3.4 million SMC common shares. At SMC’s closing price of P78.25 on Friday, the Sys’ holdings in San Miguel had a market value of P270.5 million. Computations show that the stock had not moved up much, rising by only 2.3 percent from P76.50 on April 2, 2014. This means that in five months, the Sys scored a paper gain of only P6.05 million!

Like the rest of the public stockholders of San Miguel, the Sys could not expect more than P0.35 per share dividend per quarter because SMC’s retained earnings are tied to its treasury shares.

As of June 30, 2014, SMC had a total of P175.3 billion in retained earnings, divided into appropriated retained earnings of P29 billion and unappropriated retained earnings of P146.3 billion. But the unrestricted surplus would not all be available for declaration as dividend either in cash or in stock because P140 billion of that has to cover for the redemption of the company’s treasury shares.

In other words, as of June 30, 2014, SMC had only about P6.4 billion available for distribution as dividend if the cost of treasury shares, amounting to P140 billion, is deducted from unappropriated retained earnings of P146.3 billion.

If only additional paid-in capital (APIC) is still declarable as stock dividend, then SMC would have been one of the best stocks that investors could accumulate for good. But the Securities and Exchange Commission had changed the rules and for a valid reason. Why should a listed company return to stockholders what they had paid in buying unissued common shares?

APIC represents the premium a company charges over par value in selling unissued common shares. It is available for stock dividend in case a financially distressed company undergoes a quasi-reorganization to wipe out its deficits.

As of June 30, 2014, SMC had APIC of P178.1 billion, an amount that would be too big to remain an idle entry under equity. By dividing this among the owners of 2.4 billion outstanding shares, they would be getting P74.9 per share.

If only the SEC had not amended the rule governing APIC, San Miguel common shares would have been the most attractive stock available in the market today. At P78.25, SMC would have been a good buy.


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  1. if you held smc shares since november last year you would have also been entitled to property dividend of top frontier shares every 10 shares = 1 TFHI share which is equivalent to around 12.7pesos dividend per smc share(based on 127 pesos per share price of TFHI). im sure henry sy is not disappointed in that