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Riga Technical University 53rd International Scientific Conference dedicated to the 150th anniversary and
The 1st Congress of World Engineers and Riga Polytechnical Institute / RTU Alumni
“Dividend Payment Behaviour in CEE Countries”
Julija Bistrova, Riga Technical University, Natalja Lace, Riga Technical University
There is a large number of stock investors, who follow
“bird-in-hand” theory, and, therefore, invest in the dividendpaying companies. It can become especially topical for the
companies listed in the Central and Eastern Europe (CEE) as
the region is often associated with the high level of risk, while
the dividends can offer certain shield from the price decline.
The present research is dedicated to studying dividend
payment behaviour of the CEE companies as well as looks
into the factors, which determine dividend payment policy.
II. FACTORS AFFECTING DIVIDEND PAYMENTS IN EMERGING
MARKETS
With the concerns about European debt and slowing growth
in China, companies that pay dividends seem to become even
more attractive by offering downside protection. Co-CIO of
Charlemagne Capital, Julian Mayo, says that “Improving
corporate governance and management has led to falling debt
levels and steadier cash flows, creating a platform for
sustainable dividend payments.”
Several prominent researches suggest that dividend policies
and dividend payment behavior is very similar to the one
observed in the developed countries, and specifically in US.
The factors, which have the most significant influence on
determining the dividend payments, are profitability, market to
book ratio, sales growth and amount of debt [3].
Besides, Aivazian et al. pays special attention to the country
specific factors such as high reliance on banking system of the
companies located in emerging markets [1]. Therefore, the
dividend policy is also being affected by the proportion of
long-term debt to total assets.
Other researchers add the list of the dividends affecting
factors with the level of institutional ownership, business risk,
growth rate and firm size [2].
III. DIVIDEND PAYMENT POLICY IN CEE COUNTRIES
The following passage briefly describes how and which
factors affect dividend payment in CEE countries and provides
an overview of the dividend payment behavior during the last
seven and a half years, including also crisis period.
A. Dividend Yield and Dividend Payout Ratio
Average dividend yield in CEE countries ranges from 3% to
6.5%, which appears to be relatively high, which is rather asto
share of dividend paying companies
70%
8%
dividend yield
60%
7%
50%
6%
B. Industry factor
On the industry dimension CEE firms follow the classical
pattern, when the highest dividend yields are delivered by the
utilities, communications and financial companies.
C. Size factor
Size factor seems to have a certain influence on the
dividend payment behaviour as there is a clear discrepancy in
dividend yields and payout ratio between small capitalization
companies and mid/large capitalization companies, which
obviously are paying more to the investors.
7.0%
6.0%
4%
30%
3%
01.06.2012
01.01.2012
01.08.2011
01.03.2011
01.10.2010
01.05.2010
01.12.2009
01.07.2009
01.02.2009
01.09.2008
01.04.2008
01.11.2007
01.06.2007
01.01.2007
01.08.2006
01.03.2006
0%
01.10.2005
1%
0%
01.05.2005
2%
10%
01.12.2004
20%
40.0%
5.0%
35.0%
4.0%
30.0%
25.0%
3.0%
20.0%
2.0%
15.0%
10.0%
5.0%
0.0%
0.0%
small
middle
large
Fig. 4. Dividend Yield and Payout Ratio based on CEE Firm Size
D. Sales Growth Factor
Analysis of the sales growth factor influence provides rather
ambiguous picture. The companies capable of posting highest
sales annual growth rate are also paying the highest dividend
yield and stick to rather high payout ratios. The lowest yields
and payout ratios are seen in the 25% of analyzed companies,
which show second lowest growth rates.
IV. CONCLUSIONS
The companies located in Central and Eastern European
region are rather willing to share the parts of their profits with
the investors as indicated by the high dividend yields, which
did not suffer significantly due to crisis. Analysis of 117 CEE
companies shows that there is a certain influence of the
factors, which usually define dividend payment behavior such
as industry and size factors. However, the impact of the
dynamics of the sales growth does not appear to be very
consistent with classical notions. Additional research needs to
be done regarding the main shareholders influence exerted on
the dividend policies in CEE countries.
V. REFERENCES
[1]
[2]
[3]
Fig. 1. Dividend Yield and Share of Dividend Paying Companies in CEE
45.0%
1.0%
5%
40%
50.0%
dividend yield
dividend payout ratio
dividend payout ratio
I. INTRODUCTION
nishing, taking into account the nature of developing markets,
which requires large capex. Partly this can be explained by the
favourable dividend tax policy. During the crisis time the
dividend yield declined a bit as well as the share of dividend
paying companies.
dividend yield
Keywords – dividends, dividend payout ratio, corporate
profitability, dividend yield, CEE Countries
V. Aivazian, L. Booth and S. Cleary " Do Firms in Emerging Markets
Follow Different Dividend Policies From Those in the US: Evidence
From Firms in Eight Emerging Countries", Journal of Financial
Research, vol. 26, no. 3, pp.371 – 387, 2003.
B. Al-Najjar, "Dividend behaviour and smoothing new evidence from
Jordanian panel data", Studies in Economics and Finance, vol. 26, no.
3, pp.182 – 197, 2009.
K. Anil and S. Kapoor, “Determinants of Dividend Payout Ratios-A
Study of Indian Information Technology Sector Indian Information
Technology Sector”, International Research Journal of Finance and
Economics, vol. 15, pp.63-71, 2008.