Record dividends expected for Singapore’s largest stocks this year: Janus Henderson

ASSET manager Janus Henderson expects Singapore’s largest stocks to issue record dividends for the full year, exceeding the previous peak in 2011.

According to the latest Janus Henderson Global Dividend Index published on Wednesday (Nov 15), which captured global top 1,200 companies, the strong growth in Singapore’s banking stocks in the third quarter has propelled payouts to rise by 31.3 per cent to US$4.5 billion among the large stocks in the Republic.

The index’s comparison is based on underlying figures, which have been adjusted for distortion factors such as one-off special dividends, fluctuating exchange rates, the effect of changing companies in the global top 1,200 list that comprise the dividend index, as well as the impact of payment date changes.

For the Asia-Pacific region, excluding Japan, dividends fell by 9.4 per cent to US$85.1 billion. This was the weakest region for the quarter. The drop was mainly driven by sharp declines in distributions in Australia and Taiwan.

Australian dividends dropped 17.5 per cent to US$26.2 billion, which reflected steep cuts in the mining sector.

The biggest dividend cut – more than half on the year – came from mining company BHP, which was also the largest dividend payer in the past two years globally. BHP’s profits have fallen sharply on lower commodity prices, noted Janus Henderson.

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Australia also recorded strong contributions from the oil and banking sectors, though insufficient to offset the drag by mining companies.

Taiwanese companies’ payouts fell 17.1 per cent to US$22.7 billion as more than half of the firms captured in the index cut their dividends.

“The biggest impact came from Nan Ya Plastics, whose 60 per cent dividend reduction reflected a sharp decline in sales and profits,” said the asset manager, noting that other downstream petrochemical companies in Taiwan also suffered a similar fate.

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Excessive supply of steel in Asia caused by China’s slowdown also weakened payouts by China Steel, while Taiwan’s life insurance industry reduced dividends due to devalued assets and higher hedging costs.

“The tech sector stood out as every Taiwanese tech company in our index either increased or held its dividend,” said Janus Henderson.

Sat Duhra, co-portfolio manager for Asian dividend income at Janus Henderson, noted: “The weakness in the materials sector was largely expected given the inherent cyclicality from linkages to commodity prices, but the attraction of a diversified dividend region such as Asia, excluding Japan, is that other markets and sectors can help to offset this weakness.”

For the big payers in Hong Kong, dividends rose 3.7 per cent to US$28.9 billion, led by BOC Holdings and China Mobile.

While one-third of the captured Hong Kong companies made dividend cuts, the troubled real estate sector registered the most falls – where every company reduced or maintained its dividend.

“Without the property sector cuts, Hong Kong’s dividend growth would have been almost three times faster in Q3,” said the asset manager.

China as a positive surprise

Meanwhile, Chinese dividends reached a new record – up 7.8 per cent to US$38.2 billion – due to a large increase from PetroChina, masking weaknesses among China’s banks and property companies.

PetroChina more than doubled its dividend on the year to US$6.5 billion, making it the second-largest payer in the world in Q3, behind China Construction Bank.

While China Construction Bank remained the country’s biggest dividend payer, it made a small cut along with most Chinese banks, in contrast to the global trend for higher banking payouts.

“The biggest negative impact came from troubled property company Country Garden Holdings,” Janus Henderson said.

“China was a positive surprise despite the current macroeconomic concerns,” Duhra explained, noting that macro uncertainties would always lessen dividend pressures. “We would expect global volatility to remain elevated as the impact of higher-for-longer interest rates is felt, but we would expect less pressure on dividends than earnings as the ability to pay these dividends is still not in question.”

Global headline payouts fall but underlying dividends grow

Global dividends fell 0.9 per cent in the quarter on a headline basis to US$421.9 billion. However, the underlying growth, which adjusted for distorting factors, was 0.3 per cent.

Janus Henderson trimmed the headline forecast for the year slightly to US$1.63 trillion from US$1.64 trillion, to reflect lower special dividends and strengthening dollars.

The asset manager said that underlying growth of global dividends, which is unaffected by exchange rates and one-off special dividends, is stronger than expected.

“Moreover, several countries, including the US, France, Canada, Switzerland and China are on track to deliver record payouts,” added the global fund manager, upgrading the full-year forecast for dividends’ underlying growth to 5.3 per cent from 5 per cent.