Update | Stock traders punish Gree Electric for not paying dividend for first time in a decade
China’s biggest maker of air conditioners plunged as much as 10 per cent after declaring it would not issue a dividend despite growth
Many Chinese investors have come to expect healthy dividends these days. In fact, when they don’t get them, their outrage is often reflected immediately in the share price.
As such Gree Electric Appliances, China’s biggest maker of air conditioners, tumbled by as much as 9.9 per cent in Shenzhen trading on Thursday after declaring it would not be issuing a dividend for the first time in a decade.
The stock was down by 9 per cent to 45.58 yuan at the close on Thursday. Selling was heavy, with trading volumes up by more than five times the 30-day average, according to Bloomberg data.
Despite a 45 per cent increase in net income last year, Gree said in an exchange filing that it has no plan to pay dividends because it wants to reserve capital to expand capacity and make investments in new areas, such as smart equipment and integrated circuits.
The shares of its main rival, Midea Group, a manufacturer of electric appliances from fridges to air conditioners, fared better even after posting slower earnings growth than Gree. They dropped 2.3 per cent to 51.40 yuan on Thursday after announcing a dividend of 1.2 yuan per share based on profit that increased 18 per cent last year.
“Some investors buy Gree’s shares for the sake of its generous dividend payouts as the company is seen as a typical big blue-chip company on China’s stock market,” said Wang Chen, a partner with Xufunds Investment Management in Shanghai. “Unlike small investors, they do care about the issue.”
