Singapore prides itself on being a financial hub with access to high-quality banking, finance and Fintech companies as well as talent within the space. Our trio of local banks – DBS (SGX: D05); UOB (SGX: U11); and OCBC (SGX: O39) – are also some of the biggest banks in South East Asia. They are also often cited as among the best, safest, strongest, or most innovative banks in the world as well.
Apart from boosting Singapore’s banking and finance hub credentials, DBS, UOB and OCBC are also among the largest companies listed on the Singapore Exchange (SGX). Together, they currently comprise close to 44% of the Straits Times Index (STI) – Singapore’s benchmark index.
|Banks||Market Cap *||Weightage on STI **|
|DBS (SGX: D05)||$78.7 billion||18.62%|
|OCBC (SGX: O39)||$52.5 billion||13.73%|
|UOB (SGX: U11)||44.3 billion||11.38%|
* SGX Stock Screener (As at 10 October 2021)
** FTSE Russell (As at 30 September 2021)
This means that when we invest in the STI, almost half of our portfolio would be exposed to just the three local banks. Another thing the three local banks are known for is also paying relatively good and stable dividends to investors.
|Banks||Share Price||Dividends Per Share In 1H 2021||Dividend Yield|
|DBS (SGX: D05)||$30.43||$0.51||3.4%|
|OCBC (SGX: O39)||$11.62||$0.25||4.3%|
|UOB (SGX: U11)||$26.29||$0.60||4.6%|
Information accurate as of 10 Oct 2021
In 2020, the Monetary Authority of Singapore (MAS) put a cap on the banks’ dividends at 60% of their FY2019 dividends. This was mainly a pre-emptive measure to ensure that the local banks maintained a strong lending capacity to support Singapore’s economy throughout the pandemic. On 28 July 2021 – despite Singapore reverting to a Phase 2 (Heightened Alert) status – the MAS lifted this dividend restriction.
This has already seen the banks improve their dividend distributions to shareholders. Given this trend, we can expect dividend yields to climb back above 4% for DBS as well.
DBS is also the only bank to pay out dividends on a quarterly basis, while OCBC and UOB make half-yearly dividend distributions. This is also one reason why DBS’ dividend yield is lagging the other two banks currently.
DBS (SGX: D05)
DBS (SGX: D05) is the largest bank in Singapore and also Southeast Asia. It has operations in 18 markets including Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Myanmar, Philippines, Taiwan, Thailand, UEA, UK, USA and Vietnam.
Currently, DBS is trading at $30.43, giving it a market capitalisation of close to $78.7 billion. In 2021, DBS’ share price has gained nearly , rising 24.0%. Currently, DBS is also trading at close to its all-time highs.
In its latest 2Q 2021 results announcement, DBS increased its dividend to $0.33 per share, which it had paid before COVID-19 hit. This was a result of MAS lifting restrictions on the amount of dividends that banks can pay. Its dividends announced in 1Q 2021 was $0.18 per share – which was in line with dividends it was allowed to pay as MAS restrictions still applied. This brings its 1H 2021 dividends to $0.51, or 3.4% dividend yield.
For reference, DBS paid a dividend of $1.26 in its FY2019. Assuming DBS goes back to paying the same dividend in 2021, its dividend yield would rise to above 4.0%.
OCBC (SGX: O39)
OCBC also has a strong regional and global presence, in Australia, China, Hong Kong, Indonesia, Japan, Myanmar, South Korea, Taiwan, Thailand, UK, USA and Vietnam.
Currently trading at $11.62, OCBC has a market capitalisation of $52.5 billion. OCBC’s share price has gained in 2021, registering an improvement of 15.0%.
As OCBC pays out dividends on a half-yearly basis, its latest dividends announced came after MAS lifted restrictions on banks to pay dividends. OCBC announced a dividend of $0.25 for its 1H 2021. This gives it a dividend yield of 4.3%.
For reference, OCBC paid $0.53 in FY2019. If we assume that it pays the same dividend as FY2019 this year, its dividend yield would be 4.6%.
UOB (SGX: U11)
UOB (SGX: U11) also operates regionally and in major global financial centres including Australia, Brunei, Canada, China, France, Hong Kong, India, Indonesia, Japan, Malaysia, Myanmar, Philippines, South Korea, Taiwan, Thailand, UK, USA and Vietnam.
Currently trading at $26.29, UOB has a market capitalisation of $44.3 billion. Similar to DBS and OCBC, UOB’s shares have also climbed in 2021. In the year-to-date, its share has increased 15.9%.
Since UOB also pays out dividends on a half-yearly basis, it has also announced its dividends after MAS lifted its restrictions. For its 1H 2021, UOB announced a dividend of $0.60, translating to a dividend yield of 4.6%.
In FY2019, UOB paid out $1.30 in dividends, and if we assume it goes back to paying a similar dividend this year, UOB’s dividend yield would rise to above 4.9%.
Read Also: 4 Dividend-Paying ETFs On SGX To Invest For Dividend Income: iShares Barclays USD Asia High Yield Bond Index ETF (O9P); Lion-Phillip S-REIT ETF (CLR); NikkoAM-StraitsTrading Asia ex Japan REIT ETF (CFA/COI); Phillip SING Income ETF (OVQ)
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