Tencent Offering Higher Dividends As Profit Growth Slows Down
In an effort to make its stock more attractive in the light of slow growth in its latest quarterly result, Chinaese technology giant Tencent Holdings Ltd has announced that they will increase the dividend payouts by 36% from the previous year’s HK$ 0.55 per share to HK$ 0.75 (from US$ 0.0708 to US$ 0.0966). This is to regain investors’ interest in their stock, as the slowdown is seen as an indication that the company’s market might have reached their maturity stage, according to observers.
In its latest quarter results, the company earned a record low of 15% profit, compared with end 2010’s 56% and consecutive years of triple-digit profit growth prior to that since being listed eight years ago.
The audited profit attributable to their equity holders for the year of 2011 was RMB 10.203 million (US$ 1.617 million), an increase of nearly 27% compared to 2010. Meanwhile, basic and diluted earnings per share for the year ended 31 December 2011 were RMB 5.609 and RMB 5.490 respectively (US$ 0.889 and US$ 0.870).
From a macroeconomic perspective, the global economy has encountered increasing challenges and uncertainties last year, with the deepening sovereign debt crisis in European countries. On the other hand, China’s economic growth has slowed down, but still remained at a tolerably level. Internet subscribers in the world most populous country continued to grow by 12.2 percent in year-on-year basis (lower than previous year’s 19.1%), at more than 500 million users.
The e-commerce and internet services company has been profitable for almost a decade, and has no plan to make any acquisitions in the near future. Hence, Tencent has more than adequate cash to offer higher dividends to shareholders, in order to keep investors from shifting to other stocks with higher potential returns.