THE Jamaica Stock Exchange Limited (JSE) is among a number of financial entities that have decided not to declare a dividend in what can be described as a challenging economic environment.

This was the first time the JSE has skipped a semi-annual dividend declaration since it began doing so in 2015. Even during the COVID-19 pandemic the JSE continued to declare dividends to its shareholders, with the last payment of $0.128 made on April 27.

The JSE, in a July 19 news release, told shareholders that the board of directors had made the decision at their meeting on that day.

The JSE communicated that the decision was not taken lightly, but, based on the challenging market conditions in which the company currently operates, the board determined that it would be prudent not to pay a dividend at this time. “The board will continue to monitor the performance of the market and will make a determination as to whether a dividend may be considered at a later date within the year,” the stock exchange said in the release.

The JSE earns 0.35 per cent in cess income on every transaction on the market, along with fees from its Jamaica Central Securities Depository (JCSD) and JCSD Trustee Services Limited subsidiaries. However, there has been no new initial public offering (IPO) or general secondary market offering in the first half of 2023, with only FosRich Limited’s rights issue being the first offer to date. This has also been compounded by the fact that trade values on the Main Market fell 67 per cent to $18.18 billion, down 64 per cent on the Junior Market to $5.84 billion and down 31 per cent on the US-dollar market to US$6.75 million for the first half of 2023.

Microcredit firm Access Financial Services Limited (AFS) also decided to skip a dividend declaration at its July 10 meeting, explaining that the decision “reflects prudent liquidity management to facilitate increased business development and loan disbursements”.

AFS’s March 2023 audited financial statements are still pending but the company, which used to be a consistent quarterly dividend-paying stock, has skipped other dividend declarations since the COVID-19 pandemic in March 2020.

One factor that has affected different financial companies in recent times is the rise in interest rates that has made capital a lot more expensive to run their operations. This has translated to a compression in net interest income and a decline in some asset classes. There has also been a reduction in foreign exchange spreads and fee income for different businesses as well.

For other businesses, the introduction of Basel III and the accompanying requirements have meant that more firms have had to preserve capital to meet the more stringent regulatory measures. There have also been new regulatory measures for other financial businesses, which has meant more capital has to be retained for the businesses.

Thus, financial conglomerates like NCB Financial Group Limited have skipped dividend payments over the last two years while Scotia Group Limited reduced its first-quarter dividend from $0.35 to $0.25 as it geared up for Basel III. Scotia has maintained its quarterly dividend payments despite the pandemic, even if they are at reduced levels.

VM Investments Limited, which used to pay a semi-annual dividend, has also held off on dividends since 2021.

JMMB Group Limited skipped its dividend declaration last November and has not published a disclosure as yet to consider a dividend after the publication of its March 2023 audited financial statements.

“JMMB has to be very circumspect and very conservative as to how we manage going forward. As a result of that, our board of directors, we meet on November 11th to consider a dividend, and we thought that — based on the volatility that we continue to see in the market and the underlying liquidity challenges that the overall market faces — that JMMB should be very conservative and not declare a dividend at this point in time. As soon as market conditions stabilise we will look to declare a dividend. Whilst we know that there’s an expectation of our shareholders that we would do a dividend, we want to manage carefully as we go forward,” JMMB Group Chief Executive Officer Keith Duncan said at the November 2022 investor briefing.

Other financial firms like Barita Investments Limited, which would normally declare a semi-annual dividend, has not had a dividend consideration in 2023. The only other time Barita skipped a consideration was in 2020 when only one dividend was declared in that period.

Proven Group Limited also skipped a dividend recently and will be meeting on July 31 to consider a dividend again.

Mayberry Investments Limited and Mayberry Jamaican Equities Limited are the only financial firms that have recently increased their dividends to $0.30 and $0.07, respectively, to be paid on July 31.

Financial firms in the JSE’s Financial Index make up most of the market capitalisation of the overall market. Thus, the quarterly and semi-annual dividend payments have become an expected source of income for many shareholders.

JMMB’s Duncan, though, told shareholders at the November briefing that the company wants to make dividend payments as soon as possible.

“What we want to do is that, based on the volatility — and we are hopeful that we will begin to see interest rates begin to level off in the near future — we will definitely get back to the table as a board of directors to review, because we would definitely like to be able to pay a dividend as soon as markets normalise and to reward our shareholders for their investment in the JMMB Group,” he said.

For the remaining firms which fall in the JSE’s Financial Index as of July 21 prices, Sterling Investments Limited and Sygnus Credit Investments Limited’s Jamaican-dollar shares continue to boast dividend yields of six per cent and above, with residents of Caricom countries not incurring withholding tax.

The United States-dollar versions of both companies are also generating dividend yields above five per cent.

General Accident Insurance Company Jamaica Limited, Dolla Financial Services Limited, and Guardian Holdings Limited have dividend yields above four per cent.

Manufacturing and distribution firms have been increasing their dividend payments, with Wisynco Group Limited, Jamaica Broilers Group Limited, and Caribbean Cement Company Limited all increasing their recent dividend declarations and recommendations for shareholders. Blue Power Group Limited, Lumber Depot Limited, Cargo Handlers Limited, GraceKennedy Limited, and several other firms will be considering dividend declarations in the coming weeks. Carreras boasts the highest dividend yield of 9.46 per cent, which means that if an investor bought $100 worth of shares in the company, they’d receive a gross amount of $9.46 as a dividend payment.