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By NBF News
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Shareholders of Afromedia Plc have said that financial state of the advertising firm and their general interest were the major motivation behind their decision to have their dividends converted to bonus.

Afromedia plc had in a motion during the annual general meeting held recently in Lagos declared a dividend of 2.5kobo for every 50 kobo share, amounting to the sum of N100.89 billion payable to shareholders whose names were registered in the Register of members as at the close of business on Thursday, April 19, 2012. Another sum of N100.87 billion was also set aside to be capitalised to allow the company issue bonus shares in the proportion of one ordinary share for every 10 ordinary shares held for the financial year ended 30th September, 2011.

However, shareholders unanimously rejected the cash dividend opting instead for its conversion to bonus issue, following which, the motion was amended and the sum of N201.77 billion was capitalized and was distributed in the proportion of one ordinary share for every 10 ordinary shares previously held by shareholders.

Speaking to Vanguard on decision, the Chief Scribe of Independent Shareholders Association of Nigeria, ISAN, Mr. Adebayo Adeleke, said they took the decision to convert the cash dividend to bonus as the total sum accruing to minority shareholders would amount to so little after deduction of the statutory with-holding tax.

'The company has not being in a good financial state, and when you are proposing paltry 2.5 kobo dividend that is still subject to withholding tax, how much will it amount to? So, we looked at it and said they should convert it to bonus, because one can still convert the bonus to cash by selling the shares.

'Shareholders are becoming more sensitive. We considered overall interest of shareholders, the cash flow of the company and its survival. By the time they withdraw withholding tax, we will have nothing left. Also the company will spend money posting the dividend, coupled with other sundry expenses,' Adeleke stated.

He suggested that era of accepting penny dividends from quoted companies might be over, saying that the same thing happened in UTC, where they asked the company to plough back the money proposed as dividend into their operation, instead of wasting money processing and distributing them.

Afromedia financial statement has been in a continuous decline.