Singapore firms to pay 5% less dividends this year: IHS Markit

Singapore

SINGAPORE companies are expected to deliver US$14.2 billion in dividends in 2020, down 5 per cent from US$14.8 billion a year ago.

The fall in dividends comes amid a stark outlook following the implementation of Singapore's circuit breaker since April 7, which is projected to trigger a shrinkage of gross domestic product by more than 4 per cent, said IHS Markit in its APAC 2020 dividends report.

Banking, property-related and telecommunication sectors will contribute around 70 per cent of total dividends.

Singapore's trio of banking stocks - DBS, OCBC and United Overseas Bank (UOB) - play a "decisive role" in the trajectory of overall level of payments from the Singapore market, contributing 38.9 per cent of total dividends. Payments from these stocks are forecast to decline "moderately" by 3.1 per cent to US$5.4 billion.

Robust levels of CET1 ratios as well as the freedom granted by the Monetary Authority of Singapore (MAS) to pay dividends have given the banks greater flexibility in capital management amid the challenging environment, the report said.

However, with UOB's downbeat earnings outlook, IHS Markit is expecting the lender to suspend its special dividend for fiscal 2020, which has consistently been S$0.20 a share from a historical perspective.

The full picture of the banks' dividend payment remains uncertain if the Covid-19 pandemic lingers, the report added.

For Singapore's real estate sector, total dividend distribution is projected to fall by 6.1 per cent year on year to US$2.5 billion, from US$2.7 billion the year before.

Real estate investment trusts' cash flow is expected to be negatively impacted by rental rebates and deferral offered to tenants. Moreover, MAS's granting of a 12-month extension of distribution will bring more uncertainty on payment timings.

In the Asia-Pacific, IHS Markit is projecting a 2 per cent drop in aggregate dividends to US$534.9 billion in 2020, from US$546.6 billion a year ago. The region's year-on-year growth momentum is predicted to dampen from 5 per cent in early-January to negative growth in May, based on current estimates.

Compared with the Middle East and the Americas, Asia-Pacific 2020 dividends remain resilient and are expected to be cut the least among the three regions.

Mainland China, Japan and Hong Kong are the region's largest dividend contributors. Mainland China is forecast to replace Japan as the largest dividend-paying market in 2020, despite any drag on dividend growth caused by the novel coronavirus pandemic. The China market is anticipated to distribute aggregate dividends of US$128.1 billion in 2020, up 4 per cent year on year in US dollar terms, or 7 per cent in yuan.

Dragged by Australia and Singapore, the developed market in Asia- Pacific is projected to shrink by 3 per cent in aggregate dividends. The emerging market, led by mainland China, is expected to remain stable with a -1 per cent decline.

The report covers 5,023 stocks in the Asia-Pacific region, with dividends of respective countries aggregated based on the date the dividend amount was declared by each company.