Let me give you a peek at my oldest SGX stock holding …
I’ve been receiving dividends since I bought my first share of Suntec REIT (SGX: T82U) back in 2005.
While 20 years have passed, the feeling of receiving cash in my bank account still makes me smile.
There’s no better feeling than being rewarded for your patience with cash you can use right away.
But, there’s something even better than receiving your regular dividend.
It is that pleasant surprise when your stock declares a special dividend.
This additional payout puts even more cash that you can spend whichever way you want.
Question is, can you spot special dividend stocks before they declare them?
We surveyed the stock market and rounded up several special dividend candidates.
Excess capital
One common reason for companies to declare special dividends is that they have excess capital.
But what does “excess capital” mean?
In business-speak, this term refers to a company having more cash than it needs for its daily operations and other corporate needs such as merger and acquisitions.
When this scenario arises, there is a fair chance the business may declare a special dividend to pay out this excess cash to shareholders.
The three local banks are great examples when it comes to paying out excess capital.
DBS Group (SGX: D05) is committed to whittling down its stock of excess capital over the next three years.
Singapore’s largest bank introduced a “capital return dividend” of S$0.15 per share per quarter to be paid out over 2025.
Similarly, OCBC Ltd (SGX: O39) also declared a special dividend of S$0.16 for 2025 as part of its plan to return S$2.5 billion of capital to shareholders over two years.
Not to be outdone, United Overseas Bank (SGX: U11) paid out a special dividend of S$0.50 in two tranches to distribute its surplus capital.
Anniversary dividends
Some companies dish out special dividends to celebrate an anniversary or special event.
Haw Par Corporation (SGX: H02) is one such example.
Back in 2018, the healthcare conglomerate declared a special dividend of S$0.85 to commemorate its 50th anniversary.
Another example is PropNex Ltd (SGX: OYY) which declared a special dividend of S$0.025 to celebrate its 25th anniversary.
Capital recycling activities
Then, some companies have undertaken “capital recycling” activities to unlock value for their shareholders.
Such a decision usually comes after a strategic review where management outlines initiatives to streamline the business, re-ignite growth, and cut costs.
Divestments usually follow, and the proceeds are used to pay out special dividends to shareholders to increase the company’s total dividend payout.
A great example is Singtel (SGX: Z74).
The telco received S$1.9 billion in asset recycling proceeds for its fiscal 2025 ending 31 March 2025.
From these proceeds, Singtel paid a “value realisation dividend” of S$0.047 for the fiscal year, taking its total dividend payout for FY2025 to S$0.17.
Keppel Ltd (SGX: BN4) is another blue-chip group that is actively monetising its assets.
The asset manager announced S$1.5 billion of divestments for 2024, a 61% year-on-year jump over 2023.
However, Keppel did not pay out a special dividend; instead, it chose to keep its full-year 2024 dividend constant year on year at S$0.34.
Keppel intends to accelerate its asset monetisation to achieve S$10 billion to S$12 billion of divestments by the end of 2026.
Hence, the asset manager could be the next in line to pay out a special dividend.
Get Smart: Stay focused on the business
There’s no magic formula for spotting companies that pay out special dividends.
What you can do is to analyse the business behind the stock.
If the business is accumulating significant amounts of cash on its balance sheet that it does not utilise, the chances are higher that it could be the next stock you own to pay out a special dividend.
Case in point: in 2024, Haw Par declared another special dividend of S$1 per share, this time without any anniversary fanfare to go along with it.
The group’s cash balance had swelled to S$746 million by 2024, compared to around S$466 million in 2019 after paying its anniversary special dividend.
Who would say no to extra dividend cash in your pockets?
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Disclosure: Royston Yang owns shares of Suntec REIT and DBS Group.
