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Slight 2.5% fall seen in Singapore 2019 dividends in absence of DBS's one-off

IHS Markit expects top 3 contributors - Singapore banks, real estate and retail sector - to continue paying higher dividends in coming years

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Dividend huggers may be slightly miffed because 2019 dividends from Singapore is expected to fall 2.5 per cent to S$19.9 billion due to the absence of one-off specials from DBS Group Holdings and Keppel Corp.

Singapore

DIVIDEND huggers may be slightly miffed because 2019 dividends from Singapore is expected to fall 2.5 per cent to S$19.9 billion due to the absence of one-off specials from DBS Group Holdings and Keppel Corp.

Property and Reit loyalists will be rewarded as real estate payouts are likely to rise in 2019 according to financial data provider IHS Markit.

In fact, IHS Markit's 2019 Asia-Pacific dividend report is bullish on growth from corporate payouts, excluding specials, and Singapore is no exception.

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Singapore banks, the biggest dividend contributor and real estate, the second largest, and the retail sector are expected to continue paying higher dividends in the coming years.

Telco, the third-largest dividend sector is represented by only one stock - Singtel. The company will pay a flat dividend of S$2.85 billion - as per management guidance, said Chong Jun Wong, IHS Markit's senior research analyst.

And to put Singapore 2019's expected S$19.9 billion into context, 2018's massive S$20.4 billion was simply amazing, bolstered by the S$2.2 billion worth of one-offs, consisting of DBS's S$1.28 billion plus Keppel Corp's S$90 million.

Bank shareholders won't be entirely disappointed as United Overseas Bank (UOB) is expected to pay another special dividend, said Mr Wong.

UOB's special dividend was around S$332 million for 2018.

"Yes we are expecting a special dividend from UOB for 2019," said Mr Wong.

"The big three banks in Singapore continue to be the largest dividend contributors and are projected to pay S$7.13 billion in 2019," he said.

While total dividends from this sector are set to fall in 2019 owing to the absence of the one-off specials paid by DBS in 2018, fundamentals remain robust and consensus earnings estimates reflect an upbeat outlook for the banks, said Mr Wong.

Against the uncertainties arising from trade disputes and property cooling measures implemented by the Singapore government earlier in 2018, DBS played down concerns relating to the impact of the trade war while UOB and OCBC are still expecting housing loan growth for the year to be around mid-single digit, he said.

Singapore banks are also expanding overseas to capture growth opportunities around the region, he said.

"Coupled with a strong capitalisation and expectation of a widening of the net interest margin over the short term, we believe that the positive outlook will translate to higher dividends going forward," said Mr Wong.

Elsewhere, he highlights two sectors in Singapore with dividend growth that show no signs of abating.

"We are expecting the real estate sector, which is the second largest dividend contributor, and retail sector to pay higher dividends for the third consecutive year," he said.

Collectively, property developers and real estate investment trusts (Reits) are set to pay S$3.28 billion in dividends in 2019. The retail sector is represented by the newly added constituent Dairy Farm International and Jardine Cycle & Carriage, which are expected to pay S$396.9 million and S$496.2 million respectively, he said.

In 2018, the real estate sector paid S$3.21 billion, with developers contributing 46 per cent and Reits contributing 54 per cent.

For 2019, the contribution from developers will rise to 47 per cent versus Reits' 53 per cent.

The 2019 report looks at dividends that are announced in 2019; it incorporates FY2018 final dividends and FY2019 interim dividends.

IHS Markit's Singapore coverage looks at 32 stocks comprising the Straits Times Index's 30 plus Suntec Reit and Mapletree Commercial Trust.

The report said total dividends declared by Asia-Pacific firms in 2019 are expected to grow 2.3 per cent to US$552.7 billion.

Japan, China and Hong Kong remain the top three dividend payers in 2019, representing around 65 per cent of the aggregate dividends in Apac.

Japan will continue dominating Apac payouts with dividends likely to total US$123 billion, down marginally from the previous year as a result of a weakening yen, the report said.

On a constant currency basis, dividends are forecast to grow 3 per cent to 13.9 trillion yen (S$170 billion), driven largely by the automobile sector which has historically made up about 15 per cent of the nation's total payouts. For 2019, the forecast is for dividends from the sector to grow 5 per cent to 92.1 billion yen, led by progressive dividend hikes expected from automotive giants Toyota Motor Corp, Honda Motor and Nissan Motor.

China is projected to have Apac's highest growth rate; ordinary dividends are forecast to climb 12.3 per cent to US$118.3 billion in 2019, equivalent to a 16.6 per cent increase when measured in local currency terms.

All sectors except media are projected to grow in 2019.

The strong growth is due mainly from banking as well as higher contribution forecast from a recovery in the oil and gas sector, which together make up almost half of total dividends from China.

Banking growth is expected to be led by China Minsheng Bank, where the forecast is a general uptrend in annual profit-linked payouts over the medium term despite a volatile payout trend, it said.

The big four Chinese banks - Agricultural Bank of China, Bank of China, China Construction Bank and Industrial & Commercial Bank of China - are forecast to deliver dividend growth, as an expansion in net interest margins and robust asset growth more than offset the downside impact from an increase in writedowns and negative impact from the regulator's crackdown on wealth management products.

Real estate dividend payouts could climb over 25 per cent on the back of expected hikes from developers China Vanke and China Merchants Shekou Industrial Zone.

Hong Kong's dividends are forecast to be over US$113 billion, up 10.5 per cent with banking and real estate making up the bulk of payouts. Real estate dividend growth is climbing steadily from about 15 per cent of the total contribution, to a projected 21 per cent in 2019. Larger dividends are likely from top Chinese property developers China Evergrande, Country Garden Holdings, while increments from Chinese oil majors CNOOC, PetroChina and Sinopec lead the uplift in H-share payouts from the oil and gas sector.

Banking dividends continue to be well supported from the big four Chinese banks as well as China Merchants Bank and Postal Savings Bank of China, and Hong Kong banks BOC Hong Kong (Holdings) and Hang Seng Bank are poised to increase dividends on the back of robust profit gains through H1 FY2018, boosted by both an expansion in margins, loan volumes as well as fee and commission incomes.

Conversely, it expects a contraction in payouts at one of the country's largest asset managers China Huarong Asset Management after a graft probe triggered management changes and impairment losses amid a liquidity crunch, while Chinese brokerages GF Securities and Haitong Securities are expected to slash dividends.