Some investor education on how dividends accrue on the Securities Exchange

By Vision Reporter

SIRâ€" We wish to correct Mr C. Ruhemba’s views in his letter “Why this, BAT?” in The New Vision of Saturday, January 8.

SIR— We wish to correct Mr C. Ruhemba’s views in his letter “Why this, BAT?” in The New Vision of Saturday, January 8. Ruhemba expresses his disappointment with the return on his alleged one-hundred-thousand-shilling investment in BAT shareholding for a whole year. At the risk of usurping the Uganda Securities Exchange (USE) and the stock-brokers’ responsibility of investor education, I wish to explain to Ruhemba how dividends/benefits accrue from investment in shares. Subject to re-investment or plough back decisions the directors of the company make, dividends/benefits are paid out of the profits a company realises over a period, usually a financial/trading year. For the year ending December 31, 2000, the first period for which British American Tobacco Uganda paid out dividends to its shareholders following its initial public offer on the USE, British American Tobacco Uganda posted a net profit after tax of sh2,371m. A dividend of sh79 per ordinary share was promptly announced and paid out to the shareholders. In October 2001, the directors again announced an interim dividend of sh60 per ordinary share for the year ending December 31, 2001. A second interim dividend of sh60 per ordinary share was announced at the end of 2001. It is therefore not true that only sh5,000 is the return on 100 shares investment over the period stated by Ruhemba. An investment in the amounts stated by Ruhemba would have yielded sh7,900 for the year ending December 31, 2000 and sh12, 000 in interim dividends alone for the year 2001. Ruhemba should also take counsel that whereas investment in securities may not be for the get-rich-quickly and that bigger benefits can only be realised with a proportional size of investment, the rate of return on investment is much higher than any other investment or savings vehicle available. If Ruhemba were a shareholder, which he regrettably is not, he would have had the benefit, not only of earning the dividends as stated above, but would also be looking forward to a possible final dividend and the possibility of selling of his shares at the USE for higher value than he invested. Ruhemba may access our accounts at the companies Registry to establish financial performance of the company. Ruth Musekura British American Tobacco Uganda

Some investor education on how dividends accrue on the Securities Exchange