Power of payouts: A big chunk of the STI has just gone ex-dividend. What’s next?

[SINGAPORE] At least 10 constituents of the Straits Times Index (STI) traded ex-dividend this past week – resulting in their share prices kicking lower, as they earmarked a portion of the cash on their balance sheets for transfer into the pockets of their shareholders.

Some of these dividend-related price adjustments were quite stark.

For instance, CapitaLand Investment closed Friday (May 8) at S$2.64, down more than 5 per cent for the week. This was largely due to its shares going ex-dividend on Monday for a payout of S$0.12 per share.

After adjusting for this dividend, holders of CapitaLand Investment shares were effectively down only 0.7 per cent for the week.

Similarly, UOL Group ended last week down 2.3 per cent, after going ex-dividend on Tuesday for a total payout of S$0.25 per share. Taking the dividend into account, holders of UOL shares were actually up 0.1 per cent for the week.

In another case, Frasers Centrepoint Trust (FCT) sank more than 3.4 per cent over the past week after going ex-dividend on Monday for a total payout of S$0.06136 per unit. If the cash that unitholders will soon receive is taken into account, FCT was only down 0.8 per cent last week.

Other STI constituents that traded ex-dividend last week included Mapletree Industrial Trust, Mapletree Logistics Trust, Mapletree Pan Asia Commercial Trust, Seatrium, Sembcorp Industries, Singapore Exchange (SGX) and Yangzijiang Shipbuilding.

The STI may face a further ex-dividend-related drag this week. DBS will trade ex-dividend on May 11 for a payout of S$0.81 per share, while Frasers Logistics & Commercial Trust will trade ex-dividend on May 14 for a payout of S$0.0295 per unit.

The STI closed Friday at 4,921.9, up 0.2 per cent for the week.

Big share buybacks

The significant ex-dividend-related price adjustments exhibited by various constituents of the STI last week were a reminder that the Singapore market remains a dividend haven, even after its strong run over the past couple of years.

This, in turn, is a reflection of the largest companies in the market achieving elevated profitability, sharpening their focus on shareholder value, and returning excess cash to investors.

Notably, the three local banks – DBS, OCBC and UOB – have all paid special dividends over the past year as part of major capital return programmes on the back of elevated profitability. Indeed, the interim dividend of S$0.81 per share for the first quarter of 2026 that DBS is due to pay later this month comprises an ordinary dividend of S$0.66 per share, and a capital return dividend of S$0.15 per share.

Meanwhile, groups such as Singtel and Keppel have been augmenting their total dividend payouts with proceeds from asset-monetisation exercises, while reorienting and scaling up their core businesses to enhance their longer-term cash-generating capacity.

These leading companies aren’t just returning cash to investors through dividends, though. Many of them have also been buying back their own shares, even as the market has rallied strongly.

During the first four months of 2026, a total of S$911 million worth of shares were repurchased by more than 50 primary-listed companies, according to research by SGX.

This was significantly higher than the S$750 million repurchased during the first four months of 2025, and the S$343 million repurchased during the same period in 2024.

Jardine Matheson and Hongkong Land – which have secondary listings in Singapore – bought back US$211 million and US$89 million worth of their own shares, respectively, during the first four months of 2026.

Among the primary-listed companies, the biggest buyers of their own shares during the first four months of this year were Singtel (S$299.8 million), OCBC (S$209.9 million), and Keppel (S$126.5 million).

Are these big buybacks improving the underlying attractiveness of these companies? Or, are they just boosting their already-elevated share prices?

Are dividends supported by asset-monetisation activities likely to be sustainable over the longer term?

Focus on core businesses

When UOB’s chief executive Wee Ee Cheong was asked last week whether the bank would de-risk its small and medium-sized enterprise (SME) portfolio in light of looming economic uncertainties, he remarked that it was not the right time to do so.

“In fact, this is the time – especially the SMEs – you have to stand by them,” he said, reported The Business Times.

For many market watchers, this may have appeared to be little more than a vague platitude. In my view, it was a profound and timely statement about the business of banking that investors ought to reflect upon, and draw lessons from, to better understand the current state of the market.

With net interest income under pressure at the three Singapore banks, many investors have focused on the potential of their fee income businesses to support their return on equity and sustain their dividend payouts.

Indeed, all three banks have expressed optimism about their fee income from wealth management activities recently.

Yet, the growing possibility of economic turbulence may soon accentuate the relevance of the traditional, bread-and-butter business of the banks.

Spikes in commodity prices and trade disruptions could result in many businesses suddenly requiring more working capital financing. Capital market turmoil may result in even large companies becoming more dependent on the balance sheets of the banks.

Supporting their clients through these potential difficulties could be highly profitable for the banks over the long term, if they price the risks appropriately and ensure they are sufficiently well-capitalised.

Profitability, growth are key

The way I see it, the capital return initiatives that the three banks launched following a period of unusually strong profitability after the pandemic will soon run its course. Their capacity to pay dividends and conduct share buybacks will subsequently be determined by the scale and profitability of their underlying businesses.

It may also be a matter of time before the same thing happens at companies that have been returning the proceeds of asset sales to their shareholders.

While investors are not wrong to focus on the ability of companies to unlock value, drive capital efficiency and return cash to their shareholders, they should perhaps also pay close attention to how effectively companies are using their retained earnings.

In order for the Singapore market to remain a dividend haven as stock prices keep climbing, it needs companies with core businesses that are profitable and growing.