Dangote cement moves to reduce dividends’ burden on cash flow

Dangote Cement, a manufacturing firm owned largely by Aliko Dangote, is restrategising to consolidate ownership and reduce the cost of dividends on cash flow.

The company announced in a statement to shareholders obtained by Ripples Nigeria on Thursday that it had received approval from the Securities and Exchange Commission (SEC) to buy-back shares in the open market.

According to the statement dated March 8, 2023, the share buyback programme will expire on December 12, 2023. The firm also received shareholders’ approval on December 12, 2022, at the Extraordinary General Meeting.

“The share buy-back will be undertaken through an open market offer or self-tender, at such times and on such terms as the Management of the Company may determine, subject to prevailing market conditions.

“The Company will continue to monitor the evolving business environment and market conditions, in making decisions on tranches of the share buy-back Programme,” the statement reads.

Read also:Dangote to pocket N292.12bn in dividend from cement business

The share buy-back, which holds for 12 months, starting from the date shareholders gave their approval, will enable Dangote’s cement company to reduce voting rights among investors holding its shares, as the buy-back will cut down the number of shareholders in the company.

As a result, Dangote Cement will have fewer shareholders to pay dividends, thereby freeing up more capital, considering dividend payments often impact the cash flow of a company due to the dividends paid out of net profit or retained earnings.

Buying back the shares will also hand shareholders profit, as it reduces the number of outstanding shares and increases the value of the equity’s share in the stock market.

However, share buy-back comes at a cost. The capital used to buy the shares from shareholders or in the open market is also from debt.

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