Not all gloom in dividend payouts even as investors fret

Investors were shown how vulnerable their returns could be in difficult times when Keppel Corp last week declared a final dividend of 22 cents a share, bringing its total dividend for last year to 34 cents a share, down a hefty 29 per cent from 48 ce
Investors were shown how vulnerable their returns could be in difficult times when Keppel Corp last week declared a final dividend of 22 cents a share, bringing its total dividend for last year to 34 cents a share, down a hefty 29 per cent from 48 cents in 2014.PHOTO: REUTERS

Amid market woes, some firms have held steady: Analysts

A couple of high-profile plunges in dividend payouts in recent times have left local investors fretting over how payouts will fare this year amid the economic gloom.

But some listed companies in Singapore have quietly managed to maintain or even grow their dividends, analysts noted. And, overall, blue-chip stocks are set to maintain their yield level despite the rocky economic conditions, they added.

Last week, investors were reminded how vulnerable their returns could be in difficult times when Keppel Corp declared a final dividend of 22 cents a share. This brought its total dividend for 2015 to 34 cents a share, down a hefty 29 per cent from 48 cents in 2014.

Keppel Corp chief executive Loh Chin Hua stressed that the total payout still amounted to about 40 per cent of the group's profit, which dropped 44 per cent in the fourth quarter and 19 per cent for the full year amid the energy market woes.

Meanwhile, telco operator M1 slashed its total dividend payout for last year by 19 per cent to 15.3 cents a share, from 18.9 cents in 2014.

SHAKY GROUND

Highly leveraged sectors will be particularly pressured. For instance, offshore and marine is one area where I think dividends may be cut, especially if the downturn in oil spending drags on.

NRA CAPITAL RESEARCH HEAD LIU JINSHU, on weak earnings potentially driving down dividend payouts

This left the payout at the 80 per cent minimum committed to by M1.

Its chief commercial officer, Mr Lee Kok Chew, said this was a suitable level owing to the uncertain economic outlook.

Remisier Alvin Yong told The Straits Times: "I don't think investors are surprised... as expectations have moderated in the past six months, given how challenging the business environment has become."

NRA Capital research head Liu Jinshu said weak earnings could drive down dividend payouts.

"Highly leveraged sectors will be particularly pressured. For instance, offshore and marine is one area where I think dividends may be cut, especially if the downturn in oil spending drags on,'' he said.

However, other firms unveiled stable or even higher dividends for last year. These included several real estate investment trusts (Reits), which maintain a 90 per cent payout minimum as stipulated by the Monetary Authority of Singapore.

CapitaLand Mall Trust's distribution per unit (DPU) grew 3.8 per cent year-on-year to 11.25 cents last year, while Ascendas Reit's DPU rose 9.7 per cent to 11.947 cents in the nine months to Dec 31.

Said Mr Yong: "For the dividend-hunting investors, Reits will remain a safe choice, but there are still pitfalls. Investors need to see whether the interest rate hikes this year will erode the distribution, especially for the more vulnerable commercial property Reits."

Despite the mixed outlook, blue-chip stocks are likely to maintain a dividend yield level of above 3 per cent a year, Mr Liu noted.

Dividend yield is an indicator of dividend relative to share price.

"As share prices drop, some companies may, in fact, increase their payout ratios to mitigate the impact of lower earnings, in order to reward shareholder loyalty.

"Overall, I would expect the STI stocks to yield about 3.5 per cent per annum, in line with the historical average from 2008 to date," Mr Liu said, referring to Singapore's benchmark Straits Times Index.

A version of this article appeared in the print edition of The Straits Times on January 27, 2016, with the headline 'Not all gloom in dividend payouts even as investors fret'. Print Edition | Subscribe