VIP Gloves Ltd (ASX:VIP) has approved a new dividend policy for the company whereby an annual dividend payout ratio of between 20% and 40% of earnings before significant items, subject to the company's financial position, will be determined.
This will be payable as cash dividends to holders of VIP shares.
The payment ratio was determined after taking into consideration cash required to be conserved for the expected capital expenditure anticipated over the next 12 months for the expansion of its second glove factory.
Investors have welcomed the news with shares as much as 26% higher this morning to 7.8 cents.
Policy effective immediately
Dividends will be declared and paid twice a year after the announcement of the company’s preceding half-year and full-year financial results.
The dividend policy is effective immediately with the first dividend payable after finalising the consolidated financial statements of the company for the six months ending December 31, 2020.
Declaration of dividends is subject to the discretion of VIP’s board of directors, having regard to the best interests of the company and the limitations imposed by the solvency tests contained in the company’s constitution and other requirements of applicable corporate law.
Nothing in the dividend policy shall restrict the discretion of the company’s board of directors from authorising any capital expenditures that the directors deem to be in the best interests of the company.
These expenditures may limit future amounts of dividends payable under the policy.
New production facility
The company is planning to construct a new production facility in the outskirts of Kuala Lumpur in Malaysia to increase production of nitrile gloves.
VIP proposes to build up to 10 double-former lines with an annual production capacity of about 2.5 billion gloves.
The new factory will have a total 8,000 square metres of space including manufacturing space, warehouse, storage facilities and other amenities and will be built on 3.26 acres of land owned by the company’s 100% subsidiary KLE Products Sdn Bhd.
Tise land is adjacent to the current glove manufacturing operations at Beranang Industrial Park, on the outskirts of Kuala Lumpur.