Dividend frequency - The newest addition to Nordic companies' toolbox

Abstract: Most companies listed in the Nordics pay dividends once a year, and the ones who pay more often are likely to have their legal origin in a country outside of the Nordics. However, during the last five years, a total of 32 companies listed in the Nordics have increased their dividend frequency. The capital market reaction to these changes is usually positive surrounding the announcement, especially if the change leads to an increase in present value of future dividends for the investors. The most commonly stated reason for increasing frequency is to better match the payment of dividends with the company's cash flow before financing, followed by investor friendly reasons such as more quickly distributing profits to its investors. How the change in frequency is practically made varies between companies, as some companies postpones part of their dividend when increasing frequency, while others advances part of the dividend. All companies headquartered in Sweden that have changed dividend frequency have delayed payment of part of its dividend, and we partly blame this on the legal framework in Sweden, which is different from the ones in the other Nordic countries. We suggest that the Swedish Companies Act is revised so that the Annual General Meeting may mandate the Board of Directors to distribute dividends throughout the year, just as with share repurchases.