MTN Nigeria, a global leader in mobile communications, has presented its shareholders with a new dividend policy.
The new model calls for the corporation to distribute dividends in shares rather than cash.
MTN Nigeria requested its shareholders to approve a scrip dividend proposal at their annual general meeting, which is scheduled to take place on April 18, in a letter issued to the Nigerian Exchange Limited (NGX) on Friday.
The corporation stated that because dividends paid in shares would be reinvested in the business, the scrip dividend scheme would be advantageous to the shareholders.
The scrip dividend will also help MTN Nigeria to retain more cash which in turn will be disbursed to finance its working capital
The document read: “Directors have proposed for shareholders’ approval at the AGM, a scrip dividend plan that would give interested shareholders the option to elect and receive new ordinary shares in the Company instead of receiving the dividend in cash (“Scrip Dividend Election Plan”).
“It will also benefit the Company as the cash, which would otherwise be paid out in dividends, will be retained for working capital and other general corporate purposes.”
Ripples Nigeria understands that the shares for dividends payment will reduce MTN’s dependence on borrowing from the capital market and consequently increase its liquidity to do business.