Tel Aviv-traded firms cut dividends, hold on to cash as virus wreaks uncertainty

The coronavirus pandemic has caused Israeli firms whose shares are traded on the Tel Aviv Stock Exchange to cut back on dividends they pay out to shareholders and hold on to their cash as a result of the economic havoc and uncertainty caused by the coronavirus pandemic.

Data released by the TASE show that in the first half of the year, publicly traded firms have paid out dividends for a total of NIS 5.7 billion ($1.65 billion), down 40 percent from the NIS 9.5 billion paid out by the firms in the same period a year earlier. Just 108 firms paid out a dividend in the first half of this year, compared to 163 in the same period a year ago.

Many companies declare a dividend distribution each year near the date of publication of the company’s annual financial report in March, in accordance with their dividend distribution policy, which is usually a certain percentage of the annual net profit. Accordingly, in the second quarter of each year the largest total dividends are distributed.

In March and April, 10 companies announced their decision not to make or to suspend a dividend distribution that was to be distributed for 2019 earnings under their distribution policies, TASE said.

Uncertainty about the impact of the coronavirus pandemic and how long it will last has led many companies to hold on to their cash. Companies that were not materially affected by the crisis, or even increased their profits during this period, went ahead with the dividend distribution, signaling to investors that their financial condition was allowing them to continue to operate in accordance with their dividend distribution policy.

According to the data, dividends paid out in the first half of 2020 by energy, oil and gas firms dropped 89%; insurance firms by 100%; banks by 26% and tech firms by 21%, compared with the same time a year earlier. Dividend payments by biomed firms and financial services firms rose 4% and 8% respectively.

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Written by Aakash Malu


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