The Smart Investor
    Facebook Instagram
    Monday, January 30
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Blue Chips»MAS Calls on Local Banks to Limit Their Dividend Payments
    Blue Chips

    MAS Calls on Local Banks to Limit Their Dividend Payments

    Chin Hui LeongBy Chin Hui LeongJuly 30, 2020Updated:July 31, 20203 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    What’s up?

    In a surprise announcement, the Monetary Authority Singapore (MAS), Singapore’s central bank, has called on the local banks to cap their dividend payments for this year.

    MAS’ recommendation is for banks to pay out a maximum of 60% of the total dividend per share paid out in the fiscal year 2019.

    At the same time, banks were urged to offer shareholders the option of scrip dividends to conserve even more cash.

    MAS’ move comes as a pre-emptive measure to bolster the banks’ reserves and enable them to be in a better position to support lending to businesses and individuals who have been adversely impacted by the pandemic.

    The move is done in the name of prudence, as COVID-19 continues to infect numerous people around the globe with no signs of slowing down.

    As such, the central bank is encouraging banks to carefully manage their capital in case a more adverse scenario emerges.

    At the same time, Ravi Menon, the managing director of MAS, has also recognised the need for banks to pay out a certain level of dividends to supplement the income of investors who rely on it.

    So what?

    As all the local banks are under the purview of the central bank, they would have to adhere to its recommendations and put a cap on their dividends for this year.

    The three local banks are DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Limited (SGX: U11) and OCBC Ltd (SGX: O39).

    As a recap, DBS paid out a quarterly dividend of S$0.33 in the first quarter of 2020. This means that annualised, the annual dividend should amount to S$1.32.

    UOB paid out a total dividend of S$1.30 last year, while OCBC’s full-year 2019 dividend stood at S$0.53.

    A reduction of 40% from last year’s dividend level means that DBS can pay out a maximum of S$0.79, UOB can pay out a maximum of S$0.78 while OCBC has to cap its current year dividend at S$0.318.

    Now what?

    Shortly after the MAS announcement was made, DBS released a statement stating that the cap restricts its cumulative dividends to S$0.72 for the next four quarters starting from the second quarter of 2020.

    The other two banks have yet to formally announce their dividend caps but are likely to do so very soon.

    Assuming the local banks pay out the maximum allowable dividends for this year, DBS’ dividend yield will fall to 3.5%. UOB’s dividend yield will be reduced to 3.9%, while OCBC’s dividend yield will stand at 3.6%.

    With share prices battered to multi-year lows, many attractive investment opportunities have emerged. In a special FREE report, we show you 3 stocks that we think will be suitable for our portfolio. Simply click here to scoop up your FREE copy… before the next stock market rally.

    Click here to like and follow us on Facebook and here for our Telegram group.

    Disclaimer: Chin Hui Leong owns shares in DBS Group Holdings Ltd, United Overseas Bank Limited and OCBC Ltd.

    Yahoo
    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    Merger and Acquisition

    What Makes Some Serial Acquirers So Successful

    January 30, 2023
    Data Centre (Sunlight)

    5 Key Takeaways from Mapletree Industrial Trust’s Latest Business Update

    January 30, 2023
    Screen Showing Share Prices

    Get Smart: Why You Shouldn’t Focus on Share Prices Alone

    January 29, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.