Singapore - AS if the news isn't bad enough already, retirees here should brace themselves - for it seems Singapore stocks will see a miserly increase in this year's ordinary dividends.
According to financial services data provider Markit, Singapore is forecast to distribute S$15.865 billion in 2016 - up a meagre 0.3 per cent from 2015's S$15.824 billion. If specials are included, the distribution is projected to fall 2.5 per cent to S$16.2 billion, from S$16.611 billion last year.
It's the worst among Asia Pacific countries for positive dividend growth - excluding Australia and Indonesia, which are forecast to cut payouts, said Markit in the 2016 dividend outlook for 13 Asia Pacific countries.
The cut in special dividends is not restricted to Singapore, Markit forecasts that total aggregate dividends for Asia Pacific will decrease 1.7 per cent to US$393.3 billion while ordinary dividends are expected to continue to grow for a fifth consecutive year to US$391.1 billion.
Singapore banks as a sector remain the biggest dividend payers. The three Singapore banks' contribution to total dividends rose to 27.2 per cent in 2015 from an average 25 per cent since 2011, said a Markit analyst. Their contribution is estimated to fall slightly to 27.1 per cent this year, she said.
DBS Group Holdings and OCBC Bank are expected to see single-digit increases while United Overseas Bank (UOB) is unlikely to pay a special dividend in its final 2015 results.
But UOB is expected to increase its interim 2016 payout to 40 cents a share from 35 cents the year before, said the analyst.
"We are not currently expecting a special dividend to be paid out in the calendar year 2016 as there isn't a clear guidance on this," said the analyst.
"But we do expect the final dividend to be at the same level as the declared 2015 interim 35 cents as the management aims to keep an even split ratio between the two dividends, compared to the previous 30:70 ratio," she added.
For Financial Year 2014, UOB paid interim, final and special dividends of 20 cents, 50 cents and 5 cents respectively for a total of 75 cents.
UOB has paid special dividends of 10 cents in 2010 and 2012, and 5 cents in 2013 and 2014.
Markit is projecting an 11.1 per cent cut by UOB in 2016, based on the aggregate dividends.
Markit's dividends outlook is based on what's expected to be announced in the 2016 calendar year. So the year-on-year comparison is based on the dividends announced in 2015 (FY14 final + FY15 interim) and dividends in 2016 (FY15 final + FY16 interim).
South Korean dividends are forecast to see the highest growth of 20.9 per cent among Asia Pacific countries due to the government's directive to release excess cash into the economy.
Top companies such as Samsung Electronics Co (SEC) and Hyundai Motor Co are now engaged in an aggressive dividend policy of distributing up to 50 per cent of annual free cash flow through share buybacks and dividends, and raising their payout ratio to 20 per cent and 30 per cent respectively.
The utilities sector, mainly driven by two government-controlled companies, Korea Electric Power Corp and Korea Gas Corp, are required to raise payout ratio to 40 per cent by 2020.
Two-thirds of Asia Pacific's 2016 aggregate dividends are projected to be almost equally contributed by three markets throughout the year - China, Japan and Hong Kong, which are all forecast to deliver higher returns on both dollar and constant currency basis than the previous corresponding year, said Markit.
In Hong Kong, aggregate dividends are forecast to grow a marginal 0.4 per cent to HK$636.1 billion (S$117 billion). "We foresee dividend growth to remain muted for the top contributing banking sector going forward," it said.
China's forecast is 5.3 per cent up to 549.9 billion yuan (S$120.1 billion) in 2016, compared to 4.9 per cent a year ago and the double-digit growth rates in 2012-2014.
Against the backdrop of the recent slowdown in industrial and economic activity in the region as well as the regulator's guideline towards more transparent and predictable profit distribution practice in Chinese companies since 2013, the growth in dividends from China is expected to be lower but more sustainable, Markit said.
For 2015, Japan had an impressive 20.3 per cent underlying dividend growth on the back of positive growth recorded across all sectors, although in dollar terms it was a mere 5.4 per cent, due to the significant depreciation of the yen. The 2016 forecast is to deliver a normalised underlying dividend growth of 9 per cent.
This article was first published on January 7, 2016.
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