The coronavirus pandemic has increased pressure on shareholder dividends as organizations continue to hold onto the money from the last financial year.
Some regulators around the world have given directives to halt dividend distribution for 2019 and 2020 for banks for at least three months to increase capital and support lending during the pandemic period.
The pressure to share the dividends is coming from various sources. However, both regional and European regulators have recommended that banks pause payment dividends until October. Several companies in other sectors have also followed the directive.
NCBA and Nation Media Group are some of the companies that have already announced that they will withhold dividend payments to shareholders. They have instead offered a bonus share for every 10 held as a method of providing an income to their investors.
Co-operative Bank has announced that it will pay SH 5.86 billion dividends ahead of its AGM, which was postponed because of the Covid-19 regulation measures.
The Bank of Uganda has postponed payment of dividends and bonuses in an attempt to reserve enough money to support the economy in the wake of this pandemic.
Payment of dividends implies putting money in the pockets of few shareholders who require capital to meet personal expenses that, in turn, create demand due to reduced cash flow.