Introduction

Dividend policy is the policy utilized by an organization to adopt what quantity it'll pay to
shareholders within the sort of dividend. There is certain number of profits square measure
reserved within the company as preserved earnings whereas another part is distributed as
dividends to the shareholders. With regards to share valuation model, the value of share
varies because it depends on the number of divided distributed for the shareholders.
Dividends are typically distributed in the sort of money (cash dividends) or shares (share
dividends). When a company distributes a money dividend, it must have spare money to do
so. This creates a cash flow issue. Profit generated may not be within the sort of money. A
company may have profit of $450 million however the money solely rose by $190 million in a
very financial year. This is a priority to the management as insufficient money could mean
the corporate is unable to distribute a dividend. Investors earn returns from their shares in
the sort of capital gains and dividend yield. Dividend yield is an vital ratio in evaluating
investment. The ratio of the actual distribution or dividend, and the total distributable profits,
is called dividend payout ratio. For instance, a payout ratio of 5% means every Ringgit in net
income, 5% is being paid out as part of their dividend. Say Google earns $50 million in total
as their net income and the payout ratio is 25%, Google will offer $12.5 million to every of
their common shareholders. This is based on one’s company ratio and it differs from one firm
to another as many internal and external factors are involved.

In order to look dividend policy in-depth, two famous firms have been chosen to be evaluated
which are Sunway Construction Group representing the construction sector while Ajinomoto
Bhd representing the consumer sector. These two firms have been decided to be evaluated
is because they have been paying dividend for 4 consecutive years since 2014 to 2017.

Sunway Construction Group Berhad, an investment holding company, engages in the

construction business in Malaysia, Singapore, India, and the United Arab Emirates. It
operates in Construction and Precast Concrete segments. The company designs and
constructs residential, commercial, and institutional building projects. It also undertakes civil
engineering and infrastructure projects, including roads, highways, rail transportation
infrastructure, bridges, water treatment plants, and other infrastructure works; and provides
foundation and geotechnical engineering services, including bored piles and earth retentive
systems. In addition, the company offers mechanical, electrical, and plumbing services, as
well as specialized engineering solutions; styles, develops, manufactures, and supplies
formed concrete product for residential, commercial, and industrial development projects;
and undertakes sub-contract works for precast fabrication. Further, it is involved within the
rent of serious machineries, mechanical and engineering works, facade engineering and
consultancy business, construction engineering, and transportation agency business, as well
as manufacturing and distributing formed elements and building materials. The company was
founded in 1976 and relies in Subang Jaya, Malaysia. Sunway Construction Group Berhad is
a subsidiary of Sunway Holdings Sdn. Bhd. According to Mung (2016), the company is
additionally seen as a powerful contender for coming mega infrastructure comes like the
sunshine Rail line three, the Klang Valley Mass mass rapid transit Line a pair of and also the
Bus speedy Transit (BRT). The company includes a very sizeable order book, and it has its
parent company (Sunway Holdings Bhd) to support its business. As of Dec 28, Sunway
Holdings had a 54.42% stake in SunCon. SCGB is the only construction company that has
completed numerous packages all told 3 public transportation comes, namely the MRT, LRT
and BRT. The award of contracts and commencement of works under MRT2 are set in 2016,
while LRT 3 construction is expected to start in either finish of this year or 1Q16. We are of
the opinion that SCGB is well-positioned to secure some of the contracts primarily thanks to,
(1) its experience in infrastructure construction and experience in technically advanced
projects; (2) monetary capability to undertake massive scale projects; and (3) complete
recognition in quality and timely delivery. We expect the awards to boost SCGB’s order book
in FY16 onwards, contributing materially to its earnings in FY17 and onwards.

Ajinomoto (Malaysia) Berhad is engaged in manufacturing and merchandising of

monosodium glutamate (MSG) and alternative related merchandise. The Company's
segments include Umami, Food and seasoning, and Other. The Company's Umami segment
consists of merchandise that are derived from the fermentation method, such as MSG and
connected merchandise. The food and seasoning segment consists of merchandise derived
from the extraction and combination method, such as industrial seasonings, TUMIX and
related seasonings. Other section consists of merchandise sold-out by the Company, such
as industrial sweetener, frozen food and provision of services in reference to food industry.
The Company offers retail products under the brands, such as AJI-NO-MOTO, TUMIX, SERI-
AJI, AJI-SHIO, PAL SWEET, AJI-MIX and AJI-NO-MOTO PLUS. Its industrial products
consist hydrolyzed vegetable supermolecule (HVP), AJI-AROMA, AJIMATE and ACTIVA TG.
Ajinomoto Malaysia’s revenue are primarily derived from domestic sales, which account for
75th. The remaining 25% are contributed by its export markets in the middle east, largely
contributed by Saudi Arabian Peninsula. The group intends to continue to grow this section.
Computation of relevant financial ratios for analysis of the companies’ dividend
policies for the years 2014, 2015, 2016 and 2017

SUNWAY CONSTRUCTION GROUP

FINANCIAL QUARTER:
(1) Q1: March (2) Q2: June (3) Q3: September (4) Q4: December

YEAR CALCULATION

2014 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :

6.03 + 10.59 + 8.34 + 18.12 = 43.08

Declared Dividend in Cent (Q1 + Q2 + Q3 + Q4) : 5.00 (Interim Dividend) + 0.00 +

6.00 (First Interim Dividend) + 0.00 = 11.00

Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share ):
11.00 ÷ 43.08 = 0.26 or 26%

Retention Rate (1- Payout Ratio):

1 – 0.26 = 0.74 = 74 %

2015 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :

8.45 + 13.54 + 7.54 + 12.04 = 41.57

Declared Dividend in Cent (Q1 + Q2 + Q3 + Q4) :

0.00 + 5.00 (Second Interim Dividend) + 26.00 (Special Dividend) + 6.00 (Interim
Dividend) = 37.00

Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share ):
37.00 ÷ 41.57 = 0.89 or 89%

Retention Rate (1- Payout Ratio):

1 – 0.89 = 0.11 = 11 %
2016 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :
5.71 + 7.82 + 7.02 + 9.08 = 29.63

Declared Dividend in Cent (Q1 + Q2 + Q3 + Q4) :

0.00 + 5.00 (Second Interim Dividend) + 0.00 + 7.14 (Interim Dividend) = 12.14

Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share ):
12.14 ÷ 29.63 = 0.41 or 41%

Retention Rate (1- Payout Ratio):

1 – 0.41 = 0.59 = 59 %

2017 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :

5.33 + 9.62 + 7.38 + 3.82 = 26.15

Declared Dividend in Cent (Q1 + Q2 + Q3 + Q4) :

0.00 + 7.00 (Second Interim Dividend) + 0.00 + 3.00 (First Interim Dividend) = 10.00

Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share):
10.00 ÷ 26.15 = 0.38 or 38%

Retention Rate (1- Payout Ratio):

1 – 0.38 = 0.62 = 62 %
AJINOMOTO BHD

FINANCIAL QUARTER:
(1) Q1: June (2) Q2: September (3) Q3: November (4) Q4: March

YEAR CALCULATION

2014 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :

13.53 + 12.53 + 13.49 + 9.35 = 48.9

Declared Dividend in Cent (Q1 + Q2 + Q3 + Q4) : 0.00+ 0.00 + 0.00 + 20.00 (First
and Final Dividend) = 20.00

Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share ):
20.00 ÷ 48.90 = 0.41 or 41%

Retention Rate (1- Payout Ratio):

1 – 0.41 = 0.59 = 59 %

2015 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :

16.94 + 20.37 + 18.94 + 10.84 = 67.09

Declared Dividend in Cent (Q1 + Q2 + Q3 + Q4) :

0.00 + 0.00 + 0.00 + 33.75 (First and Final Dividend) = 33.75

Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share ):
33.75 ÷ 67.09 = 0.50 or 50%

Retention Rate (1- Payout Ratio):

1 – 0.50 = 0.50 = 50 %

2016 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :

21.31 + 19.76 + 22.27 + 245.00 = 308.34

Declared Dividend in Cent (Special Dividend + Q4) :

113.00 + 42.00 =155.00
 Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share ):
155.00 ÷ 308.34 = 0.50 or 50%

Retention Rate (1- Payout Ratio):

1 – 0.50 = 0.50 = 50 %
2017 Stated Earnings per Share in Cent (EPS) (Q1+ Q2 + Q3 + Q4) :
12.96 + 27.17 + 28.24 + 24.16 = 92.53

Declared Dividend in Cent (Q1 + Q2 + Q3 + Q4) :

0.00 + 0.00 + 0.00 + 46.50 (First and Final Dividend) = 46.50

Dividend Payout Ratio (Annual Dividend Paid per Share ÷ Earnings Per Share ):
46.50 ÷ 92.53 = 0.50 or 50%

Retention Rate (1- Payout Ratio):

1 – 0.38 = 0.62 = 62 %

Evaluation of the companies’ dividend policies for the years 2014, 2015, 2016 and 2017

Sunway Construction Group

Throughout the calculation of the related financial ratios for Sunway Construction Group, it
can be concluded that year 2015 was probably the year where the company generated more
that its expected income compared to the other three years. The company has managed to
award their shareholders with special dividend of 26.00 cent per share in that particular year.
Year 2014 was the year where Sunway Construction Group has managed to maintain 74%
of its earnings and paid 26% of their earnings to their shareholders. This action might give
benefits towards the companies but it might also affect their shareholders as they only
received 26% of the company’s earnings. Hence, this was probably the reason why they
gave special dividend in the next year, which was to win back their shareholders’ trust
towards their company.
Ajinomoto BHD
Ajinomoto BHD only paid their shareholders dividend once in a financial year, whichis in the
fourth and last quarter. Ajinomoto BHD seems more consistent in their payout and retention
ratio as throughout the four years, they did not make significant changes on their dividend
and retention policy. It ranges from 50% to 62% and it can be seen that there are no major
changes. This indicates that the company’s income and earnings are stable which will
positively impact their shareholders trust and loyalty.

Comparison of the companies’ dividend payment and policy

Ajinomoto BHD and Sunway Construction Group are well-known labels in their respective
field in Malaysia. Hence, both of the companies might apply different types of dividend
payment and policy. However, one of the similarities that can be seen in both companies is
that they will both give special dividend whenever their level of earnings is far better that they
have projected earlier on the beginning of the financial year. Besides, both of the companies
also applied the same policy, which is Constant Payout Ratio policy where the payout ratio is
determined by dividing the company annual dividend per share with earnings per share.
Ajinomoto BHD seems more stable in their payout policy compared with Sunway
Construction Group. Sunway’s Payout Ratio fluctuated around 11% to 74% and there was a
big gap throughout the years, where Ajinomoto BHD was more stable. Ajinomoto BHD
Payout Ratio maintained around 50% to 62% without a big gap throughout the year, unlike
Sunway Construction Group. Hence, it can be concluded that both companies have their own
way of handling or applying their dividend payout policy and it is also understandable as they
are both in different sector.

Summary

Based on the evaluation of these two significant firms in their very own sector, we could see
the similarities as well as the differences in terms of their dividend policy and stability.
Sunway Construction Group has a fluctuate graph of dividend ratio of 74% in 2014, 11% in
2015, 59% in 2016 and 62% in 2017. Meanwhile, Ajinomoto seemed to have a more stable
payout ratio ranging from 59% in 2014, 50% in 2015, 50% in 2016 and 62% in 2017. We can
see that both firms have a major dropped in the year 2015, being the lowest percentage
amongst the years evaluated.

However, SCGB has managed to splurge their shareholders in 2015 after the major drop
since shareholders are the precious group that needs to be taken care of for the betterment
of the firm’s future. Being one of the trusted construction firm, without doubt, SCGB has been
many shareholders’ choice on investing as they secured many huge projects such as the
MRT, LRT, BRT, the Kuala Lumpur Convention Centre and Sunway Pyramid Shopping Mall
(Hassan, 2015).

There is not much of distinction in terms of Ajinomoto payout because the slight consistency
can be seen. Formerly notable as associate degree seasoning manufacturer, it has
transformed into a serious food producer — from occasional merchandise to soups, edible oil
and dressing, and sausages. Ajinomoto has plans to launch more merchandise from classes
such as health and nutrition, new food culture, as well as functional advantages. Last year,
the group proclaimed its set up to diversify its product giving to incorporate food merchandise
because it tries to become one amongst the leading food firms by 2020. The company,
among the first Japanese joint-venture firms to line up its base in Malaysia in 1961, has
become a household complete. According to Jaafar (2017), the company is anticipated to
plug consumer things foreign from its overseas affiliates moreover as in-house-made
merchandise. Ajinomoto Malaysia conjointly aforesaid it hopes to emulate the line of food
merchandise being offered by its regional counterparts like Kingdom of Thailand, which
provides three-in-one as well as canned occasional drinks, in addition to seasoning products.
The group is conjointly eyeing export markets within the middle east. The company already
features a presence in Saudi Arabia and also operates in Asian nation, Yemen and Jordan. It
currently exports its merchandise to regarding twenty countries in Asia, South America,
Africa and Oceanica. The company’s shares have been rising. It reflected the confidence of
the investment community on its future earnings. For now, Ajinomoto is thrilling investors with
a good dividend and capital hefty returns.
References

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Markets. Retrieved on 1st November 2018 from
http://www.theedgemarkets.com/article/ajinomoto-foresees-better-second-half

Kana, G. (2018). Ajinomoto plants to build plants in Bandar Baru Enstek. The Star. Retrieved
on 1st November 2018 from https://www.thestar.com.my/business/business-
news/2018/02/13/ajinomoto-plans-to-build-plant-in-bandar-baru-enstek/

Mung, T. S. (2016). Stock picks for 2016: Sunway Construction Group. The Edge Markets.
Retrieved on 1st November 2018 from http://www.theedgemarkets.com/article/stock-
picks-2016-sunway-construction-group

Hassan, H. (2015). Sunway Construction Group: The Largest Pure-play Construction Outfit.
MIDF Research. Retrieved on 1st November 2018 from
http://www.midf.com.my/images/Downloads/Research/Equity/SunwayConstructions/S
unCon_Initiation-Coverage_MIDF_070715.pdf