Retained earnings not for preferred shareholders
Emeterio Sd. Perez
STA. Lucia Land Inc. (SLI) disclosed in a posting on the website of the Philippine Stock Exchange its retained earnings of P3.727 billion as of March 31, 2018, up from P3.462 billion as of Dec. 31, 2017. Despite this, SLI common shares opened trading at P1.10 per common share, its session’s high and dropped to a low of P1.08 on June 20, 2018.
The question the company’s public stockholders may ask is why the stock has been trading so low. SLI stockholders should ask their stockbrokers why this is so instead of keeping the poser to themselves.
Yet, if the public investors would only analyze SLI’s financials, they would readily see why the stock has been trading at such a price when SLI common shares have par value of P1.
What are posted on PSE website are consolidated financials during the quarter and any three-month period for that matter. Translated, this means the quarterly financial statements, even if not audited, also include the quarterly performance of SLI subsidiaries.
The public instead should have been told either by their stockbrokers or Sta. Lucia Land itself how much they could expect as dividend, either in common shares or in cash. Otherwise, they can’t determine which among SLI’s units are more profitable than the others.
This is a dilemma of the public whose only link to the board of listed companies are disclosures. If any of the more than 300 or so publicly traded stocks doesn’t isolate a listed company’s financials, from the rest of these units, they would remain helpless in their search for the right stocks.
Not SLI’s monopoly
Sta. Lucia Land is not the only publicly traded stock whose financial filings may be too difficult for the public investors to understand. In fairness though, a number of listed companies make the proper filing of their financials by segregating their financial statement from those of their subsidiaries especially when these are not listed.
Perhaps, one can find explanations in footnotes to financial statements particularly those at the end of a fiscal year when listed companies disclose their financial performance apart from those of their unlisted units. Perhaps, this is what the public really need as investors who trade on listed common shares for dividends.
Speaking of dividend, the public have at the disposal information about dividends. They should be curious about how much are declarable as dividends by surfing on them whenever they access the stocks in which they place their money.
For instance, Sta. Lucia Land has nothing to show about dividend on PSE website. Let us look at other listed stocks. Ayala Corp. had on PSE website dividend of P3.46 per common share. Unluckily for the public investors, it also uses its retained earnings in paying cash dividend to preferred shareholders.
Due Diligencer’s take
Preferred shares are a company’s liabilities. Why the earnings due them should be taken from retained earnings or surplus remains a mystery.
To Due Diligencer, retained earnings belong solely to common stockholders and should never be used to pay what are due preferred shareholders.
Of course, there are other listed companies that use their retained earnings to pay interest rates that are due preferred shareholders. How come this has been happening should be asked the Securities and Exchange Commission which regulates the stock market. Hopefully, SEC Chairman Emilio Benito Aquino would consider the suggestion that retained earnings of listed companies belong to stockholders who own common shares.
It’s unfortunate that even PSE, which happened to be a listed stock, has not lifted a finger against the practice of tapping retained earnings to pay what is due preferred shareholders. It’s even more unfortunate when only voting preferred shares are issued exclusively to the owners or majority stockholders of listed companies.
Hasn’t the Supreme Court already ruled that all classes of shares should bear 60-40-percent ratio of ownership in favor of Filipinos? It’s time for SEC officials to review this ruling in an ownership case involving Philippine Long Distance Telephone Co. which First Pacific Co. has renamed PLDT Inc.
Doesn’t PLDT Inc. act as an investment vehicle of the First Pacific group in the Philippines? Just asking.
esdperez@gmail.com
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