Singapore Banks Dividend Yield And Share Price Performance

Singapore banks have done well in 2021.

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$DBS GROUP HOLDINGS LTD(D05.SI)$; UOB$UNITED OVERSEAS BANK LIMITED(U11.SI)$ ; and OCBC$OVERSEA-CHINESE BANKING CORP(O39.SI)$ – 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 45% of the Straits Times Index (STI) – Singapore’s benchmark index.

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.

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.

Among the three local banks, both OCBC and UOB dividends for 2021 reflected the lifting of dividend restrictions. As such, we can see that both banks have a slightly higher dividend yield for 2021. DBS, which pays quarterly dividends, has a slightly lower dividend yield for 2021 because the dividends it paid out for 1Q2021 were still limited by the cap that MAS has introduced at that point in time.

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 (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 $32.60, giving it a market capitalisation of close to $84.3 billion. Over the past 12 months, DBS share price has increased by about 17.7%.

For its FY2021 results, DBS achieved a record net profit of $6.80 billion, up 44% from the previous year and restoring a trend of consecutively higher earnings that the pandemic disrupted in the previous year. DBS paid a total of $1.20 in dividends for 2021.

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. After dipping about 10% over the past month, OCBC’s share price has remained flat over the past 12 months.

For its FY2021 results, OCBC reported a net profit after tax of $4.86 billion for FY2021, an increase of 35% from the year before. Its dividends in 2021 are $0.53.

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. The big news for UOB investors early this year is that UOB will be acquiring Citigroup’s consumer business in Indonesia, Malaysia, Thailand and Vietnam for about $4.915 billion. Excluding one-off transaction costs, UOB believes the acquisition will be expected to immediately accretive to UOB’s earning per share (EPS) and return on equity (ROE).

Currently trading at $29.53, UOB has a market capitalisation of $49.8 billion. Similar to DBS, UOB’s shares have also climbed in the past 12 months with an increase of about 15%.

For its FY2021 results, UOB reported a net profit after tax of $4 billion for FY2021, an increase of about 40% from the year before. Its dividends in 2021 was $1.20.