Ever wondered what happens to unclaimed dividends? When we started project Ekaris last year, Financial Insights investment in the Lusaka Securities Exchange (in 5 select companies) has yielded 3 dividend payments. However, due to some administrative quagmire, two of our payments went into oblivion due to the state of unconsciousness of a post master general.
However, the thought of having the payment delayed did make us a bit nervous until we read this article on unclaimed dividends. You see, as far as the Securities Act, No 41 of 2016 (aptly known as “the Act”), dividends that remain unclaimed for a period of fifteen years) from the date of the declaration of dividend are liable to be transferred to the Securities and Exchange Commission (SEC) and deposited in an investor fund for purposes of investor protection and market development activities as provided for in Section 158(3) of the Act.
So what this implies is that your dividends are accessible for a 15 year period (twelve years if you invested in Nigerian). Sadly though, we would not advocate for not claiming them due to the time value of money. Time value of money is the idea that a kwacha or dollar available at the present time is worth more than the same amount in the future due to its potential earning capacity. Investopedia, swears that this core principle of finance holds that, provided the kwacha or dollar can earn interest, any amount of money is worth more the sooner it is received. Therefore it is prudent of an investor to ensure that their details with their transfer secretary are constantly up to date in order for them not to lose out on any possible interest they may have earned if they had received the payment and invested it into an interest bearing asset.
The transfer secretary is the golden piece in the dividend payment jigsaw puzzle. From our experience, some transfer secretaries have minimal power and resources to chase after payments that have gone missing. Others have odd relationships with the companies they represent. What we concluded as Financial insight is that the SEC needs to do more in ensuring the drive towards e-payment dividends as well as providing surveillance information regarding dividend claims made. Furthermore, it would help if the postal system made some improvements in its delivery service (we hope ZICTA’s Address project addresses this literally).
Conversely, if you invested in a company like Copperbelt Energy for example, they go the extra mile to inform their shareholders of the importance collecting their dividends. In a recent SENS Announcement published by Stock Brokers Zambia, they even went so far as showing their frequency of dividend payments (in both kwacha and green back equivalent). This is certainly useful information and as Financial Insight we encourage all participants of the stock market to ensure that they collect their piece of value that has been created by the companies they invested in. For a kwacha today is worth more than a kwacha tomorrow.