Tallinn Exchange heavy on dividends

Photo: Toomas Huik / Postimees

This year, listed companies pay shareholders a total of €82m.

These past years, an increasing number of companies listed on Tallinn exchange have initiated dividend payments to investors – of the 13 firms in the main list, a whopping ten do that. All in all, the dividends will amount to €82m this year. A growing percentage of the companies have started to publicly declare their dividends policy. 

The «dividends breakthrough» actually happened last year, as the two groups with largest numbers of shareholders – Tallink and Ekspress Grupp – took up the habit. The latter, a media group owned by Hans H. Luik, paid one cent per share both in 2013 and 2014. A year ago, Tallink paid as much as 5 cents per share i.e. €33.5m put together. This year, Tallink paid over a third less – only €20m, making three cents per share.

According to senior LHV economist Joonas Joost, Tallink's next year’s dividends will primarily depend on summer success. «With a good result, €0.04 is realistic; with a mediocre or lacklustre result, 2014 dividends will probably remain at €0.03,» said he. Swedbank predicts Tallink to pay 2.5 cents a share.

Two stable payers

Surprisingly, the building group Nordecon made it back among dividend payers; this year, they opted to pay three cents per share. The last time it paid dividends was in 2009. The group is aiming at paying out 15 percent.

LHV believes that the year being complicated on construction market, financial results of both Merko and Nordecon will probably be below 2013.

«Thus, we see no room for Merko dividend growth,» said Mr Joost. «Considering the condition of the company and the market, Nordecon’s €0.03 for 2013 took us by surprise. Results permitting, the group’s management will probably propose payment of dividends for 2014.»

According to LHV chief economist, Nordecon’s ability to pay dividends will hank on whether – and to what extent – they will have to discount their assets in Ukraine.

Swedbank predicts Merko dividend to be 30 cents per share, and as much as five cents for Nordecon – two cents more than this year.

A look at listed companies’ history tells us that the most stable dividend payers have been Harju Elekter and Tallinna Vesi, which have paid dividends during their entire time on the exchange – the former for 17 years, the latter nine years running.

Mr Joost said that if, during a year, a solution is not found in Tallinna Vesi tariffs dispute, the dividends will probably grow from €0.90 to €0.92 per share. The company’s current policy is to increase dividends according to inflation. By Swedbank, the water group is predicted 91 cents as next year’s dividend.  

Another relatively stable payer of dividends is Tallinna Kaubamaja, only missing out in 2003 and 2004 during their exchange history; in 2001, however, it paid a whale of a dividend for the times – majority owner needing money to participate in privatisation of Estonian Railways.

Over the past three years, Tallinna Kaubamaja has paid 35 cents per share. Of this year’s payments, 15 cents were made up by dividends already received by shareholders; 20 cents will be paid due to decrease of nominal value of shares – probably received early in the autumn. 

As related to nominal value, several companies have made payments these past years. Lowering nominal value improves company capital structure, helps improve equity capital yields, and – most importantly – no income tax needs to be paid on the refund. 

Russia plays major role

While Nordecon served a positive dividend surprise this year, both economists and investors were delivered a blow by ladies’ lingerie maker Silvano FG cutting dividend by half to 10 cents per share.

In several earlier years, Silvano also has cut nominal value of shares. When it comes to this year, the result is largely up to poetical and economic tendencies in Russia.

«Assuming that, in 2013, dividends policy has rather been the conservative kind, and in second half of 2014 the decline in results will cease; the next dividends may again be higher,» said Mr Joost.

By Swedbank also, a larger dividend is expected by Silvano next year – 15 cents per share.

LHV expects Harju Elekter, Tallinna Kaubamaja and Olympic EG to keep next year’s dividends at this year’s level. During these past four years, Olympic has paid ten cents per share. According to predictions by Swedbank, Tallinna Kaubamaja will pay 30 cents i.e. five cents less than this year, while Olympic will add two cents.