Total company dividends to drop 4.5% in 2020

UOB is expected to suspend its special dividend for 2020.

Singapore companies are expected to post $20.14b (US$14.2b) in dividends for 2020, a 4.5% YoY fall compared to the $21b (US$14.8b) recorded last year, according to IHS Markit’s 2020 APAC dividends report. This results from the circuit breaker measures amidst the COVID-19 pandemic, which in turn is projected to trigger a shrinkage of the gross domestic product (GDP) by more than 4% this year.

Also read: Lower dividends on the horizon for banks' shareholders: analyst

Contributing 38.9% of total dividends in the Singapore market, the trio of banking stocks—OCBC, DBS, and UOB— play a decisive role in the trajectory of the overall level of payments from the market, the report noted.

Total dividends from the big three bank stocks—OCBC, DBS, and UOB—are expected to decline moderately by 3.1% to $7.66b (US$5.4b). These three stocks contribute 38.9% of total dividends in the market, and thus play a decisive role in the trajectory of the overall level of payments, the report noted.

The adverse impacts from COVID-19 have already taken a bite out of banks’ earnings, as reflected by their recently announced Q1 results.

UOB, for example, reported a 19% YoY decrease in net profit due to the surge in impairment charges resulting from COVID-19 fallout. Due to the bank’s downbeat earnings outlook, IHS Markit expects UOB to suspend its special dividend in 2020, which has been consistently $0.2 historically.

In contrast, DBS paid out a flat Q1 dividend despite a 29% YoY decline in net profit. Even so, the full picture of banks’ dividends payment going forward remains uncertain if the pandemic lingers, noted IHS Markit.

The real estate sector is not expected to be spared by the unprecedented disruptions from the pandemic. Total distribution is projected to decrease by 6.1% YoY from $3.83b (US$2.7b) in 2019 to $3.55b (US$2.5b) this year.

“We expect real estate investment trusts’ cash flow to be negatively impacted by the rental rebates and deferral offered to tenants. Additionally, the 12-month extension of distribution granted by the Monetary Authority of Singapore also brings more uncertainty in the timing of payment,” the report noted.

“Recently, CapitaLand Mall Trust slashed its Q1 distribution by 70.5% and paid out $0.085 to conserve cash; Mapletree Commercial Trust declared a DPU at $0.091 for Q4 2020, decreasing from $0.231 one year ago. The set of results might only be a glimpse of more hit to come,” IHS Markit added.

Overall, the country faces significant dividend key date movements in 2020, with the cancellation and deferment of mass gatherings, which in turn forced annual general meetings (AGMs) to be deferred to a further date or done online. Although some of the AGMs dates remain unconfirmed, more companies are expected to bring their AGM dates forward, concluded IHS Markit.