The China Securities Regulatory Commission has urged listed companies to reward investors with cash dividends.

Liu Shiyu, chairman of the CSRC, said the market regulator will take tough measures against companies that do not pay cash dividends in spite of being able to do so.

Liu made the remarks in a recent speech. Its transcript was posted on the CSRC website on April 8.

Analysts said that as increasing numbers of investors attach importance to cash dividends and see it as a major goal for long-term value investment, China’s listed companies will need to make payment of cash dividends one of their priorities when rewarding investors.

Offering investors cash dividends is also a way to protect investors’ rights, as cash dividends reflect a company’s capacity to make profits in an obvious, direct and transparent way, said analysts.

Liu said in the speech that paying cash dividends is a basic way to reward investors, and cash dividends are the very source of a stock’s value.

For investors who buy a company’s shares when its growth is uncertain, buying stock with no dividend would be a game of “passing flowers until the drum beat stops”, with those holding the “flowers” bearing all the risks, Liu said in his speech.

“Steady and stable cash dividend payout often signals healthy financial and operational conditions of a listed company. On the contrary, if a company doesn’t pay dividends with no proper reasons, it could signal accounting fraud or mismanagement.”

The CSRC will take tough measures against “those iron roosters which have the ability to offer cash dividends but never plucked a feather”, said Liu.

According to data of Shanghai-based Wind, an information company, out of 3,166 A-share listed companies that announced annual results by April 10, there are as many as 39 companies that have never rewarded investors with cash dividends.

A research note from Founders Securities said dividend-shy companies attribute their decision to “loss-making” performance or decreasing profits. China Galaxy Securities said in a note that Liu’s speech marks the CSRC’s determination to make the stock market more transparent and small investor-friendly.