Desco declares no dividend for the first time

State-owned power distributor Dhaka Electric Supply Company Limited (Desco) did not recommend a dividend for the last fiscal year (FY2023-24) to its shareholders for the first time in its history since it was listed on the Dhaka Stock Exchange.

In its price-sensitive statement filed at the stock exchange, the company has said that it incurred a loss in the last fiscal year and retained earnings are negative. That is why the Board of Directors of the company could not recommend any dividend this year.

During FY2023-24, Desco's loss per share was Tk12.73.

Due to the no dividend declaration, the company's share price dropped by 7.17% to settle at Tk22 in the opening session today (15 October).

In June this year, the Bangladesh Securities and Exchange Commission (BSEC) had allowed Desco to issue 60.76 crore preference shares at Tk10 each to the government against a share money deposit.

Preference shares are a type of company stock with dividends paid to shareholders before ordinary shareholders. In case of bankruptcy, preference shareholders have priority in receiving payment from company assets before common stockholders.

The irredeemable nature of these preference shares means they will not increase Desco's paid-up or common share capital. Consequently, the company is not obligated to pay any previous year's unpaid preference share dividends due to the "non-cumulative" nature of the shares.

The proposed conditions imply that if Desco makes more profits, the government will get high dividends against the preference shares and in cases of annual losses no dividends will be given.

As the new shares will not be taken into account for EPS calculation, there will be no direct impact on the company's financials.

But because of getting priority in dividend payments, the government as a preference shareholder will first receive a portion of the company's earnings as a dividend, which might ultimately decrease the net profit.