Increasing dividends by industrial firms on the JSE

This research report analyses industrial firms that are listed on the JSE over the 1989 to 2009 period to determine whether dividends have been increasing or not. The importance and relevance of dividend payments are often questioned when being compared to the advantages offered by share repurchases. Fama and French (2001) find that for their sample of US industrial firms, irrespective of firm characteristics, dividend payments by industrial firms have fallen. In contrast, DeAngelo, DeAngelo and Skinner (2004) find that while dividend payments have fallen, they have fallen exclusively for the smallest group of dividend payers and this group has a negligible impact on aggregate dividend payments. Moreover, they also find evidence of earnings and dividends concentration at the top end of the earnings and dividends spectrum. DeAngelo et al. (2004) find that industrial firms are characterised by a ‘two-tier’ structure and that there has been an increase in dividends of the larger dividend payers. This research report replicates the methodology of DeAngelo et al. (2004) and finds consistent with them in that there has been an increase in dividend payments of industrial firms, suggesting that dividends are relevant and important for firms that pay dividends in South Africa. However, while this paper also finds evidence of earnings concentration, the findings are not as clearly defined as those of DeAngelo et al. (2004). No support is found for the ‘two-tier’ structure of DeAngelo et al. (2004)