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Cash dividend plan sends TSMC shares higher

2019/02/20 12:25:29

Taipei, Feb. 20 (CNA) A cash dividend proposal gave a boost to shares of contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) on Wednesday, helping the broader market gain ground, analysts said.

Despite the upturn, however, TSMC's share price does not appear to have much room to move significantly higher ahead of technical resistance at around NT$238.00 (US$7.73), they said.

As of 11:39 a.m., shares of TSMC, the most heavily weighted stock in the local market, had gained 1.31 percent to NT$232.00, off a high of NT$233.50.

The Taiwan Stock Exchange's benchmark index, the Taiex, was up 0.74 percent at 10,227.15.

TSMC shares attracted buying soon after the market opened and the positive momentum continued into the morning, dealers said.

"The buying largely reflected TSMC's cash dividend plan announced yesterday," Dayu International Securities Investment Consultant Co. analyst Chang Chih-cheng said.

"Investors were amazed by the fat cash dividend of NT$10 to be pocketed this year."

In an announcement issued Tuesday, TSMC, the world's largest contract chipmaker, said it has proposed issuing a cash dividend of NT$10 per share in two stages: NT$8 in July and NT$2 in the fourth quarter of the year.

The NT$8 cash dividend was planned based on the chipmaker's earnings for 2018, when it posted a net profit of NT$351.13 billion, or NT$13.54 per share.

If approved by shareholders in June, the NT$8 cash dividend will equal the figure TSMC distributed for earnings in 2017 even though its 2018 earnings hit a new high. The market had expected a cash dividend of NT$9 per share.

The additional NT$2 dividend was based on TSMC's earnings for the first quarter of 2019, and would make it the first listed company in Taiwan to plan cash dividend payouts on a quarterly basis after the amended Company Act took effect in November 2018 to allow such payouts.

The cash dividend proposal means investors will be able to pocket a total of NT$10 this year.

Chang said investors shrugged off the NT$8 cash dividend but were more focused on the NT$2 part planned on first quarter earnings.

"The proposed NT$2 cash dividend per share hinted TSMC will make more than NT$2 in earnings per share in the first quarter, at a time when the global semiconductor industry is faced with downside risks due to falling demand," Chang said.

"An EPS of more than NT$2 sounds good for the current three-month period."

TSMC also said in the statement that it plans to issue a total of NT$47.14 billion in bonuses to its employees for their hard work in 2018. Half of the bonuses -- NT$23.57 billion -- have been issued, and the other half will be paid in July.

Based on a workforce of 43,000 employees, TSMC employees will receive NT$1.09 million in bonuses on average.

Despite the current buying in TSMC shares, Chang warned the stock could see stiff technical hurdles ahead of NT$238.

"TSMC shares came off an earlier high today ahead of the point of technical resistance, and I don't think the stock will make a big leap in the short term."

(By Chang Chien-chung and Frances Huang)
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