KARACHI, June 20: The government has set target of Rs54.8bn to be collected as dividends from public sector entities for financial year 2006-07, which analysts say will not be impacted by the recent turmoil at the stock market.

“Corporate earnings are expected to remain robust, which determine the dividend and not the fluctuating prices of stocks,” said stock strategist, Hashim Raza Lakhani.

For the outgoing financial year, the target of receipts from dividends, which forms substantial portion of the Government revenue was set at Rs53bn while the actual receipts stood at Rs63.79bn.

Lakhani observed that the reason that budgeted targets were exceeded was the government’s inclination to take a ‘conservative’ approach of what it could expect to receive on that account.

Tahir Hussein Ali, analyst at stock brokerage firm, Noman Abid & Co., notes that in the fiscal year 2005-06, Oil & Gas Development Company Limited (OGDCL) and Pakistan Telecommunication Company Limited (PTCL) had together contributed 71pc of the total dividend that accrued to the government. In the fiscal year 2006-07 those two heavy weights in the KSE-100 index were expected to chip in 74pc of the cumulative dividend by all state controlled entities.

The dividend target set for the FY07 from OGDCL was Rs25bn, which was 39pc higher than the budgeted amount of FY05 - but 26pc lower than the actual amount received by the government from the company during the outgoing year. However, in the case of PTCL it was the other way round. Dividend paid by PTCL to the government during FY06 amounted Rs11.52bn, which fell short from the initial target of Rs25bn by Rs13.48bn. The dividend target from PTCL for FY07 was Rs15.48bn, which was 38pc lower than what the government expected to receive from the telecom in FY06, but about 34pc higher than the actual amount that it received.

The reason that the OGDCL was likely to contribute a lesser sum in FY07 was due to the upcoming Global Depository Receipts (GDR) offering and secondary issue of the company’s stock in local bourses. That would reduce government’s stake in the company, from 95 to 85-75pc.

If the government leans heavily on dividend income from listed companies, so do the general investors. With the 30pc plunge in stock values in the last two months which fortunately have started to rebound, investors are awaiting the end of June results. The result season starts from the first week of July. Most companies are expected to come up with interim and final payouts. Market participants could differ on which way the market would turn, but the consensus view appears to be that corporate earnings would generally be in line with positive expectations.