DBS rally still has legs; it could scale new heights of over S$57 on robust dividend moves

[SINGAPORE] There is more room for DBS’ share price to continue rising in the months ahead, given the bank’s strong dividend outlook, analysts said.

Market watchers noted that DBS’ capital return plans are the strongest among the three local banks, and that investors appear to remain confident in the bank’s fundamentals.

“The bank has outlined its intended step-up in dividends for the next three years,” said Jayden Vantarakis, head of Asean equity research at Macquarie Capital. “In comparison, the two local peers remain on a payout ratio-based methodology of 50 per cent, implying absolute dividends could decline if earnings do.”

Over the past few quarters, DBS has used various methods to return excess capital to shareholders. It committed to a S$0.24 annual step-up in its core dividend per share, conducted a bonus share issue, and started a share buyback programme.

It also announced a series of special dividends, including a capital return dividend of S$0.15 a share in each quarter in 2025; it expects to pay out a similar amount of capital in the next two years.

Granted, OCBC and UOB have also announced various forms of capital-return plans in recent quarters, ranging from special dividends to share buybacks. But both committed to paying dividends at a payout ratio of 50 per cent of net income.

CGS International (CGSI) analyst Tay Wee Kuang said yields are hence not guaranteed, due to the headwinds of lower interest rates for the banks’ earnings in the near term.

“This means (DBS is) the only bank of the three that will see growing dividend yield in the next two to three years,” he said.

This has caused DBS’ share price to rally in recent weeks. The counter surged past S$50 after posting strong second-quarter earnings that beat estimates, and is currently trading near all-time highs.

Higher price target

Some analysts raised their targets on the counter.

JPMorgan on Tuesday (Sep 9) upgraded the stock to “overweight” from “neutral”, and revised its target price to S$56 from S$50.50. On Wednesday, UOB Kay Hian revised its target price to S$54.40 from S$52.80.

A research analyst from RHB estimates DBS will have a “very decent yield” of 5.1 per cent for 2026, with potential for further upsides due to more capital return dividends.

Meanwhile, CGSI’s Tay forecasts the yield will reach 6.7 per cent in 2027, which “seems to be within DBS’ comfort zone” even with the potential of declining earnings.

At the current price, DBS is still offering a yield of 5.8 per cent this year, he said. “Given the yield of DBS remains superior to (that of) its peers as well as other usual candidates for high yield, such as real estate investment trusts, we do think the share price could potentially continue to rise.”

CGSI has an “add” call on DBS, with a target price of S$54.90.

Glenn Thum, research manager at Phillip Securities Research, said DBS could continue to rise if it can hold its Q3 net interest margins and net interest income at current levels from the deposit inflows it is benefiting from.

Phillip’s target price on DBS is S$52.

But Macquarie’s Vantarakis warned that the market may be overlooking the pressure that lower interest rates will have on earnings and dividends beyond the next two years.

His target price for DBS is S$44, but he noted that it is possible the shares continue to overshoot on the upside on inflows into quality dividend-payers in the meantime.

“We are continuing to see inflows into Singapore equities. DBS is one of the highest-quality names and one of investors’ first choices when considering the market,” Vantarakis said.

According to a Bloomberg analyst consensus, as at Friday, the 12-month target price for DBS was S$53.07.

Goldman Sachs has the highest target price for DBS on the street. In August, analyst Melissa Kuang put out a “buy” call on the bank with a target price of S$57.20.

Also in August, Citi analyst Tan Yong Hong and Maybank Securities analyst Thilan Wickramasinghe set their target prices at S$56.50 and S$56.15, respectively.

DBS closed at S$51.79 on Friday, up 17.8 per cent in the year to date.