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Shareholder remuneration higher in Spanish stock market than in European neighbours

In Spain

MADRID | In Spain, dividends yields have traditionally been high, especially over the last few years, a report by the operator BME showed.

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Since 2008, the total aggregated shareholder remuneration by companies listed on the Spanish stock market has consistently exceeded €24.5 billion a year, the Spanish market operator Bolsas y Mercados BME said in a press release. Shareholder remuneration reached an annual record high of €33.9 billion in 2009 and a slightlt lower figure in 2011. The figure is 5 times as high as that recorded a decade ago (in the year 2000).

“These are relevant figures as they represent, in relative terms, between 2% and 4% of Spain’s annual GDP and are proof of the effort made by listed companies to maintain their shareholder remuneration against a backdrop of economic crisis,” BME explained.

“Although, from an academic point of view, there is still a vibrant debate about the suitability of remunerating shareholders periodically and about the most efficient way of doing it for all, Spanish listed companies have clearly opted for a generous shareholder remuneration policy, especially over the last few years. There are different remuneration formulas, but cash and scrip dividends are king”, said Domingo García Coto, Director of BME’s Research Department, during the presentation of a report about shareholder remuneration formulas in the Spanish stock market.

The report, which is the first of this type to be published in Spain and which aims “to increase the knowledge, transparency and dissemination of relevant aspects of the economy and the stock markets among all their participants,” is a comprehensive description of the shareholder remuneration options used by listed companies in Spain in the last few decades.

In the analysis, 19 shareholder remuneration formulas are identified as used by certain companies listed on the Spanish stock market at some point of their history. “A detailed description of each formula is given, as well as its effect on the company’s equity capital structure and the tax effects for the different types of investors. Besides, a real case study is given to help identify each of the formulas described,” BME added.

The dividend, which is the shareholder remuneration most frequently used, is an essential variable for investors and one which receives considerable media attention. In Spain, dividends yields have traditionally been high, especially over the last few years. Simultaneously, calls for the deleveraging of listed companies and the recapitalisation of the financial sector have contributed to the proliferation of shareholder remuneration formulas other than cash dividends. The formula most commonly used during the last few years has been the scrip dividend.

The Spanish stock market has been traditionally characterised by a high, consistent and increasing shareholder remuneration which has acted as a cushion against changes in market prices. The trend followed by dividend payments and the IGBM index between 1982 and 2012 puts the volume and growing stability of payments in stark contrast with the greater variability of the index of market prices.

The importance of shareholder remuneration in the Spanish stock market is borne out by the dividend yield data collected from 1990. These compare favourably with homogeneous data obtained from the MSCI Blue Book for stock exchanges in other developed countries such as the US, Germany or France. Between 1990 and 1997 dividend yields in Spain were consistently higher than in those markets. This situation has been repeated markedly since the start of the financial crisis, in 2007, up to the current year, a period during which dividends yields of companies listed on the Spanish stock market have exceeded those in the market comparison shown by the report.

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