REASONS WHY DIVIDENDS ARE UNCLAIMED
(Over 20 years investing experience in Nigeria’s financial markets)
Dividends are the returns given to shareholders out of the Profit after Tax. Dividends can either be paid in cash or in bonus shares. Dividends are expected to be cashed within 6 months after they are paid, dividends that are not cashed within the stipulated period of 6 months will become stale. A stale dividend can only be cashed after the shareholder takes the dividend to the company’s registrars for revalidation.
Unclaimed dividends are usually in the custody of the company’s registrars; these dividends become statute-barred after 12 years. This means that the shareholders cannot have claims to the money again, the money will revert back to the company which paid the dividend.
The accumulated unclaimed dividends in Nigeria currently stand at N60 billion. This is a huge sum and the Federal Government is planning to appropriate the accumulated sum. Can we trust government officials and politician with the management of this fund? This is a question for another day.
Dividends are unclaimed because of the following reasons.
1. FICTITIOUS NAMES: When foreign companies like First Bank, UBA, Union Bank, National Oil now Conoil, Unipetrol now Oando were indigenized through the sale of the companies’ shares to ordinary Nigerians in the 70s and 80s, some people used fictitious names in order to get as many shares as possible. Due to the fictitious names used by some of the shareholders they found it difficult to remember all the names used by them when they bought the shares and could get the needed returns on their investments, some of the shareholders are now dead and their children could to get access to their parents’ investments.
2. RELOCATION: This is another reason why dividends are unclaimed. My Uncle bought some shares in 1972 when he was a student at University of Nigeria Nsukka and relocated to Lagos after graduation in 1975, he did not get dividend nor bonus shares for 35 years due to a change in his address from Nsukka to Lagos until his son-in-law who works with one of the biggest Registrars helped him to update his details and assisted him in getting his bonus shares and dividends in 2010, by then the value of his accumulated dividends and bonus shares was over N5 million. It is always better when shareholders use a post office address, or they inform the registrars whenever they relocate.
3. DEATH: This may even prevent alert shareholders from cashing their dividends. I was surprised to see the name of my late mentor in the stock market business, among the list of shareholders who had not claimed their dividends in one of the cement manufacturing companies, this was a man who was fast when it comes to getting and cashing of his dividends, but thank God his children are up to the task and Chief Asalu’s name is no longer on the list of shareholders who had not claimed their dividends.
4. LACK OF ESTATE PLANNING: It is too bad that some supposedly educated Nigerians do not have long term plans for their assets and investments; the basic estate planning strategy is to have a will. Anybody who has built an asset no matter how small needs to have a will, this will ease the transfer of your asset and investments to your loved ones. A close friend of mine and her siblings are yet to have access to the funds in their late father’s bank accounts more than 6 years after the demise of their father, due to lack of estate planning. With my experience in business, finance and investment matters, my aged father just made me a signatory to his accounts, investments and businesses just 4 months ago when he was educated by his bank manager on the importance of estate planning. Cases of unclaimed dividends should reduce when Nigerians embrace the practice of organising and planning of their estates.
5. SMALL HOLDINGS: In the stock market it is what you sow that you will reap, if you invest small amounts you will get little dividends and if you invest big you will get bumper dividends. There are individual investors and institutional investors who get hundreds of millions and billions of Naira as dividends. Small investors are enjoined to cash their dividends no matter how small they may be; most of the unclaimed dividends that are now valued at about N60 billion are from the small investors. As they say little drop of water forms the big ocean, with time the little dividend will increase to substantial amount when the company grows just like the case of my Uncle who used part of his pocket money to buy shares when he was a student of University of Nigeria in 1972 but now gets hundreds of thousands of Naira as dividend.
