IT’S going to be another lacklustre year for dividend investors, as total Singapore dividends in 2017 is projected to rise by just 0.6 per cent, barely improved from last year’s already weak 0.4 per cent rise.
Expected ordinary dividends, excluding one-off payments, for 2017 is S$16.4 billion, compared to S$16.3 billion in 2016, according to financial services provider Markit.
It’s a lot worse in US dollar terms as total dividends in USD are forecast to be down 5 per cent to US$11.3 billion.
And misery loves company. Singapore’s paltry projected return will not even be the worst among the 13 Asia-Pacific countries tracked by Markit.
Thailand’s dividends are forecast to grow 0.4 per cent while dismal performance is expected to come from South Korea (-9.6 per cent) and Hong Kong (-0.8 per cent).
Singapore’s top paying sectors – banking and telco – which account for 45 per cent of the total payouts, are expected to increase dividends by 1.6 per cent and 1.3 per cent in aggregate terms.
However, the per-share payout by companies in the sector are forecast to remain unchanged from the previous year, reflecting moderating growth expected for both sectors, Markit said.
Higher dividend payouts can be due to an enlarged share base from companies offering dividend script in lieu of cash. Singapore’s local banks have been offering dividend script to shareholders in order to conserve cash.
The oil & gas sector continues to struggle and Markit expects another year of double-digit fall in dividends for the sector. It sees the total for the sector dropping 30 per cent to S$506.6 million from S$723.3 million in 2016 which itself was 37 per cent lower from S$1,158 million in 2015.
Markit expects three companies to continue paying special dividends this year as they did in 2016.
They are City Developments, Singapore Press Holdings and Singapore Technologies Engineering.
Overall, Asia-Pacific dividend payouts are dull, especially in USD terms.
In contrast, the rest of the world is going to enjoy a dividend surge, said Markit.
“Dividends are set to rise across the world as commodities firms put last year’s volatility behind them, however Asian stocks lag behind as Chinese and Hong Kong banks trim payments,” it said.
UK dividends top the global league table with a 10 per cent surge in payments forecast, driven by the pound slump and commodities rebound, it said.
Payments by European and North American firms are predicted to grow by over 6.5 per cent.
Asia payments are expected to fall by 2.2 per cent in USD terms although only two markets, South Korea and Hong Kong, registered falls in local currencies.
In total, Apac dividends are forecast to come in lower at US$390.9 billon, representing the first decline in four years, said Markit.
Special dividends are set to be down 63 per cent to US$3.1 billion in an absence of one-off dividends paid by Hong Kong last year due to a number of significant divestments.
The overall poor performance expected stems from the appreciation of the US dollar against Apac currencies. Consequently, markets that traditionally anchor Apac dividends such as Japan and Hong Kong are expected to register 3.4 per cent and 0.9 per cent lower dividends.
Japan is projected to contribute 22.4 per cent to aggregate dividends from Apac, and remains the top payer across the region. In 2017, it is expected to grow dividends to 10.2 trillion yen (S$127 billion), an increase of 5.2 per cent, backed by dividend growth across all sectors.
Hong Kong is expected to be the second largest contributor to Apac dividends this year at HK$599 billion (S$110 billion), down 0.8 per cent from the year before.
The majority of Hong Kong payouts continue to be driven largely by the banks, real estate companies and telcos, which are expected to cumulatively contribute 56 per cent to the country’s payout.
Banking dividends are forecast to continue on a downward trend, with 15 out of 21 companies in this segment likely to cut dividends.
Markit expects banking dividends to fall by 4.9 per cent in the coming year, largely due to the decline in dividends from the big four Chinese banks. The largest expected increase from banking for 2017 will come from Postal Savings Bank of China, which will be paying a maiden dividend since its listing in September 2016. Postal Savings Bank of China is expected to pay HK$3.1 billion in dividends in 2017, said Markit.
India is the top Apac country for dividend growth. Its aggregate dividend is expected to rise 11.3 per to US$16.5 billion, equivalent to a 12.8 per cent increase to INR 1.1 trillion (S$23 billion).
The technology sector is set to contribute one-fifth of the total dividends for a third consecutive year in 2017 with projected payments of INR 235.2 billion. The sector has continuously delivered double-digit increases in dividends since 2013, except for 2016 when new dividend distribution tax became effective and distribution growth was muted, said Markit.
This article was first published on Jan 13, 2017.
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