The Press FRIDAY, NOVEMBER 3, 1972. Restrictions on dividends

Press, Volume CXII, Issue 33064, 3 November 1972, Page 8

The Press FRIDAY, NOVEMBER 3, 1972. Restrictions on dividends

The market value of an. average portfolio of shares rose 34 per cent in the four years to 1971, and the dividend income on the same portfolio rose 42 per cent During the same period wage rates rose 45 per cent. In the last 12 months share prices have risen a further 10 per cent, but dividends are restricted by law to the same rate as last year’s. Wages rose a further 14 per cent in the 12 months to March. Shareholders’ incomes therefore almost kept pace with wage-earners’ up to 1971 but have lost considerable ground since then. The cost of living —for wage-earners and shareholders alike—rose 29 per cent between 1967 and 1971, and a further 6.5 per cent in the 12 months to September this year. As Mr D. O. Whyte, chairman of directors of the Golden Bay Cement Company, reminded shareholders at the annual meeting, wage-earners received a further 4.2 per cent general increase only last week, while shareholders cannot expect any dividend increase until April next year, at the earliest. The restriction, he said, was unfair “to an important “ section of the community who provide most of the “ risk capital on which industry depends ”. The largest shareholders in many companies are financial institutions, such as insurance companies.

Institutional as well as individual shareholders are prepared to make some short-term sacrifice for the sake of long-term stability; but if they expect the statutory stabilisation of their incomes—which in popular parlance represents a loss of “ relativity ” —to be maintained much beyond March next year, they are likely to sell their shares and buy land or buildings instead. Indeed, some investors may already be doing so, to judge from the abnormal increases in property prices in recent months. The diversion of funds from the share market and from investment in industrial ventures is probably not yet serious; but it might well hamper industrial expansion and depress employment if dividends were to be limited beyond March 31 next year. That is the date of expiry of the Limitation of the Dividends Regulations, 1972. An early assurance after the election that the regulations will not be renewed would do much to restore the confidence of investors and of industrialists.