An article on the dividend league table has now become an annual event following the conclusion of the annual financial reporting season on April 30.

The dividend league table is based on the net dividend yield and not the gross yield by each of the companies in their last annual financial year. This provides a better comparison across the market since some companies benefit from tax incentives and distribute dividends out of tax free profits.

The 2015 dividend league table therefore is based on the net dividend distributed to shareholders in respect of the 2014 financial year with the resultant yield calculated on the current market price of the respective shares.

A comparison of the 2015 league table with that published last year provides some interesting observations due to a number of developments that took place over the past 12 months.

As a start, it is worthwhile noting that yields are generally substantially lower than last year mainly as a result of the significant rally in many share prices but also as a result of some lower dividend payments. This is mainly the case with the banks.

Notwithstanding the 22 per cent decline in the overall dividend paid by Bank of Valletta plc last year, the bank retained the top spot in the league table. However, the net yield is now at 3.6 per cent compared to 5.3 per cent last year – a very clear indication of the considerable decline in yields over the last 12 months.

Malta International Airport plc moved up seven places in the league table from ninth position in 2014 to second position in 2015. The current net yield of 3.2 per cent is, however, marginally lower than last year’s net yield of 3.3 per cent as the 47 per cent increase in the dividend paid out in respect of the 2014 financial year was offset by the sharp rally in the share price from €2.25 in May 2014 to the current level of €3.46, an increase of 53 per cent. The bulk of these gains materialised in Q1 2015 following the significant increase in the final dividend and the forecast of further passenger growth expected during 2015.

The third place in the 2015 dividend league table goes to Mapfre Middlesea plc with a net yield of 3.1 per cent compared to a net yield of 3.8 per cent last year which had positioned Mapfre Middlesea in sixth positon in 2014. The company maintained its dividend payment but the 36 per cent rally in the share price resulted in a lower yield.

The net yield of Simonds Farsons Cisk plc was one of the few that improved over the past 12 months. The net yield improved marginally to 2.8 per cent but the ranking of Farsons improved to fourth place from 10th place in 2014. The 19 per cent increase in the dividend paid out for the financial year to January 31, 2015 outweighed the 17.5 per cent increase in the share price. Although the Farsons equity produced a double-digit gain, it underperformed most of the other market constituents, largely as a result of the lack of supply of shares on the market due to the tight ownership structure which restricts trading activity.

Malita Investments plc dropped two positions in the league table as the dividend only increased marginally from one year to the next while the share price jumped by 58 per cent

The property-related companies with business models capable of offering regular and sustainable dividends to shareholders have very different rankings in the league table, largely as a result of different dividends declarations last year.

All three companies saw their share prices climb over 50 per cent last year. The highest yielding equity among the group is Plaza Centres plc as the company increased its dividend by 12.6 per cent over last year following an improved financial performance on higher occupancy levels within the centre.

Despite this improved dividend, the yield declined by almost 100 basis points from 3.8 per cent in May 2014 to the current yield of 2.8 per cent, following the rally in the share price of 52 per cent. Notwithstanding the decline in the yield, Plaza improved its ranking to fourth position in the league table.

Malita Investments plc dropped two positions in the league table as the dividend only increased marginally from one year to the next while the share price jumped by 58 per cent – the second best performing equity over the past 12 months. The significant upturn in the share price led to a sizeable decline in the yield to 2.7 per cent from 4.1 per cent last year.

On the other hand, the 2.3 per cent net yield of Tigné Mall plc was marginally unchanged from one year to the next as the 52 per cent increase in the share price matched the increase in the dividend. The substantial increase in the dividend from one year to the next was due to the inclusion of the interim dividend in 2014 for the first time following the Initial Public Offering in the second half of 2013. Tigné Mall should continue with its semi-annual dividend distribution policy also in 2015 and future years.

The company that registered the largest increase in its overall dividend was Medserv plc with a rise of 133 per cent from €0.024 per share to €0.056 per share. However, this equity was also the one that performed strongest over the past 12 months with a rally of 66 per cent. The increase in the dividend outweighed the rise in the share price leading to an improvement in the yield from 1.85 per cent in May 2014 to the current level of 2.60 per cent. The strong increase in the yield helped Medserv improve its ranking from 13th place in 2014 to ninth place. Last Friday, Medserv issued its 2015 financial projections and the directors anticipate pre-tax profits rising by a further 33 per cent during the current financial year to €4 million. The substantially higher dividend being approved by shareholders during the upcoming annual general meeting could therefore be sustainable in respect of the 2015 financial year given the expectation of the growth in profitability.

RS2 Software plc doubled its dividend from one year to the next while its share price increased by 32.5 per cent resulting in an improvement in the net dividend yield from a mere 0.9 per cent to 1.4 per cent. Despite the doubling of the dividend, RS2 still ranks among the weakest dividend yielders in 13th place. On the other hand, the dividend paid by HSBC Bank Malta plc dropped by 48 per cent and the yield declined from 4.2 per cent to 2.25 per cent. HSBC’s equity dropped from third position in the 2014 dividend league table to a current ranking of 12th in the 2015 table.

As was evident again last year, investors must not only base their investment decisions on the dividend yield of any particular year but on the sustainability of the dividend in future years which is in turn dependent on individual company circumstances.

Moreover, investors would do well to understand that movements in bond yields - as discussed in last week’s article - may also impact the equity market. As share prices of some companies rallied as a direct consequence of the sharp decline in bond yields over the past 12 months, any possible rally in yields in the coming months and years could likewise negatively impact some share prices.

Notwithstanding changing yield expectations, company-specific developments such as higher earnings from new business contracts or from acquisitions could also largely affect share price dynamics. In view of these multiple factors influencing share price movements, investors need to keep well abreast of market and company developments and seek regular independent financial advice to ensure that their portfolios are well structured to benefit from such developments while remaining within their investment objectives and risk levels.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “RFC”, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.

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