Days of rising dividend payouts may be numbered

Dividend payouts by most industry-leading listed companies have been growing over recent years but the trend looks to be slowing as business problems continue to mount.

The Singapore Exchange looked at the 11 sectors on the bourse, singled out the biggest firm by market capitalisation in each and assessed their dividend policies. It found that seven of the 11 sector leaders recorded dividend payout growth over the five years to Dec 8.

These seven stocks - such as DBS in the financial industry, Singtel in telecoms and China Aviation Oil among energy firms - averaged an 8.8 per cent growth rate for their net dividends over five years.

The strongest individual dividend growth was posted by Straits Trading Company in the materials sector, at 14.9 per cent. China Aviation Oil's dividend grew 12.5 per cent, while healthcare company Raffles Medical Group raised its payout by 11.4 per cent over the period.

But market watchers told The Straits Times that the statistics may not represent the full picture, given the tighter economy of late.

"I don't expect the payout this year to be better than 2015 as the earnings reported have been soft mostly," said CMC Markets analyst Margaret Yang.

Azure Capital chief executive Terence Wong agreed, saying: "Dividend payouts have definitely slowed... in line with flat or weaker earnings. It's been a divergence from the stock market performance, which has pleasantly surprised... despite the shock events."

A quick look at the 30 stocks on the Straits Times Index (STI) supports their view. Only seven have paid out more dividends in this calendar year compared with 2015, Bloomberg data shows.

This group was led by Genting Singapore, which paid a surprise interim dividend last month to push its payout this year to three cents a share, up 200 per cent from 2015.

Singapore Airlines paid out 44 cents a share this year, up 63 per cent from 2015, while the Sats dividend rose 14.3 per cent from 2015 to 16 cents a share.

DBS, OCBC, Singtel and Capitaland kept their payout levels unchanged. Keppel Corp, Sembcorp Industries and Ascendas Real Estate Investment Trust were at the bottom of the STI stocks in terms of dividends, slashing payouts by 38 to 48 per cent compared with 2015.

Outside of the STI, China Aviation Oil paid out three cents a share this year, up from two cents in 2015, while Straits Trading maintained its payout at four cents a share.

"Aside from the banking sector, where performance has been resilient... it's hard to see dividend stability in 2017. Reits, for instance, will continue to feel pressure from the oversupply of office and industrial space," Ms Yang warned.

DBS Singapore equities research head Janice Chua said: "Generally, companies are likely to tighten their purse in the current environment where economic growth is uncertain, or to conserve cash for merger and acquisition bargains."

However, she expects at least Genting Singapore and ComfortDelGro to raise their payouts next year due to strong cash positions.

whwong@sph.com.sg

This article was first published on December 14, 2016.
Get a copy of The Straits Times or go to straitstimes.com for more stories.