MTN Nigeria’s board of directors have proposed a scrip dividend plan that will see the company’s shareholders convert their dividends into shares instead of cash.
The telecommunications company wants shareholders to limit their demand for cash during dividend payments in order to increase MTN Nigeria’s liquidity.
Dividends are often paid by cash through retained earnings or profit after tax. This leads to a decrease in the liquidity held by a firm and compels them to borrow in the capital market.
MTN Nigeria said it needs to retain more cash to fund its working capital and other general corporate purposes, a document obtained by Prime Business Africa revealed.
The document sent to the Nigerian Exchange Limited (NGX) and shareholders on Friday, 17 March 2023, states that both MTN Nigeria and the shareholders can benefit from the scrip dividend plan.
It was learnt that the scrip dividend plan enables shareholders to increase their stake in MTN Nigeria without having to buy shares with cash, a purchase method which usually will attract certain capital market charges.
“Directors have proposed for shareholders’ approval at the AGM, a scrip dividend plan that would give interested shareholders the option to elect and receive new ordinary shares in the Company instead of receiving the dividend in cash (“Scrip Dividend Election Plan”),” MTN wrote.
Shareholders will vote on the proposal at MTN Nigeria’s Annual General Meeting (AGM) to be held on Tuesday April 18, 2023.
The statement reads further: “One benefit of the Scrip Dividend Election Plan is that Qualifying Shareholders who elect to receive new ordinary shares would be able to increase the number of shares they hold in the Company without incurring capital market related transaction costs.
“Also, the election would benefit the Company as the cash, which would otherwise be paid out in dividends, will be retained for working capital and other general corporate purposes.”
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