Analysts' views on hefty dividend payouts

SINGAPORE : Singapore blue-chip companies have been giving out hefty dividend payouts recently.


SingTel and Singapore Airlines are among those that paid record dividends despite recording declines in their fourth-quarter net profits.

Analysts said there is likely to be a trend of larger dividend payouts from Singapore-listed firms as recent volatility in the stock market may prompt investors to go for such safe haven stocks.

SingTel declared a record annual dividend of 25.8 cents per share for the financial year ended March 31.

This is a yield of 8 per cent based on its recent share price of S$3.21.

Similarly, Singapore Airlines said it will be paying out annual dividend of S$1.40 per share.

This is a yield of 9.7 per cent based on its stock, which is trading at S$14.42.

Analysts believe these firms are rewarding investors after having pulled through some rough times.

In addition, they said higher dividends are also used to boost trade volumes and share prices.

This is because the dividend yields are much higher than returns from bonds and fixed deposit savings and investors may switch to hold such stocks in their portfolio.

Kenneth Ng, Head of Singapore Research at CIMB, said: "Generally, dividend yield is one of the pillars of support for valuation of shares, and having a bigger-than-expected dividend is always welcome, and is always a boost in share price."

Analysts said dividend payouts are a good indication of the firm's financial health. It also highlights the firm's confidence in the market.

Roger Tan, vice president of SIAS Research, said: "Paying dividends is a good signal to the investors that companies will not hold too much financial slack within the company. They are ready to give the money back, knowing that given the way they have run the company, as and when they need the funds to expand again, they can always go back to the market to raise new funds."

On the flipside, high-dividend-paying companies could be seen as defensive and lacking in investment opportunities.

Mr Tan said: "On the factual basis, when you return money back to the investors, you do have less money to grow. That is one. There is another question of, by giving back money, are you telling the investors at the same time that you have run out of growth plans."

Still, some analysts believe that while the Singapore market is well developed, companies are never short of ideas and investment opportunities to grow the company.

They said many blue chip companies have been looking overseas for growth opportunities and this trend will continue going forward.

- CNA/ms

Createwealth8888 is thinking ....

Why are these companies giving out hefty special dividend payouts and also recently issuing more debts instruments?