Still room for improvement in listed company dividend disclosures
The Financial Reporting Lab (part of the Financial Reporting Council) has published a study on how companies have responded to its calls for better disclosure of dividends made in 2015. The report was introduced after pressure from various investor groups for listed companies to disclose more information on dividends, including figures for their distributable profits.
The study sets out areas of developing good practice and notes that 58% of the FTSE 100 made some level of disclosure relating to distributable profits compared to 40% in 2015. However, progress was slower for smaller companies with only 30 of the FTSE 250 making disclosures on distributable profits.
The study identifies four areas for improvement:
- Clearer links between the dividend policy and the potential impact of the company's principal risks and viability.
- More disclosure on any constraining factors to dividend payments.
- More explanation on what the policy means in practice.
- Clarifying where profit is generated in the group, how profits might flow to the top of the company and any relevant constraints (current or potential) to that flow.
The study is the second to be published since the Lab's original 2015 report.