Rewards shareholders with high final dividend of Rs. 6.60 in the form of a scrip dividend on top of Rs. 3 interim scrip dividend paid in September
Sampath Bank, which pioneered many financial innovations in the banking industry – including the payment of scrip dividends – has declared a considerably high final dividend for 2010 at Rs. 6.60 per share, exclusively in the form of a scrip dividend, subject however to a payment of 10% Withholding Tax on the dividend.
This final dividend is in addition to the interim scrip dividend of Rs. 3 per share already paid in September 2010 on the number of shares of 75.8 million which then existed.
However, the proposed final scrip dividend of Rs.6.60 per share will be paid on the increased number of 152.8 million, consequent upon the two sub division of shares, given effect in 2010.
In the communiqué issued to the Colombo Stock Exchange (CSE), Sampath Bank announced that the new shares to be issued under the proposed scrip dividend would be priced at Rs. 300 per share and accordingly, 3,025,599 fully paid new voting shares would be created, which would be allotted to the shareholders on the proportion of their shareholdings.
The proposed scrip dividend will be funded entirely out of the profits of the bank for 2010 and hence there will be no capitalisation of reserves.
The policy of paying scrip dividends will be mutually beneficial, both to the shareholders and the bank. The shareholders will receive new shares of Sampath Bank with future market appreciation prospects, which are readily tradable on the CSE.
On the other hand, the bank will be benefited by the payment of scrip dividends, as this will help to avoid cash being paid out, so that the funds would be available for future income generation.
In addition, the new fully paid shares to be created under the scrip dividend would help the bank to increase the stated capital and the capital adequacy ratios.
The proposed scrip dividend is, however, subject to the CSE and shareholder approval.