Half of listed companies declare dividends


EARNINGS growth of corporate Malaysia is expected to improve on better economic outlook and positive global recovery leading the way for healthy dividend payout rates in 2018.

A check on Bloomberg showed that out of the 900 over public-listed companies (PLCs) on Bursa Malaysia, a total of 453 companies, or half of listed companies, declared dividends year-to-date (YTD) as of June 28, 2017, as compared to 464 companies a year ago.

Online unit trust distributor Fundsupermart Malaysia noted the dividend payout rates have improved.

“Shareholders will continue to get returns at an improved pace on the back of better corporate earnings and future market outlook,” Fundsupermart’s research analyst Jerry Lee told The Malaysian Reserve (TMR).

“Dividends declared by local listed companies this year show signs of improvements with Nestlé (M) Bhd, Dutch Lady Milk Industries Bhd and Petronas Dagangan Bhd (PetDag) among the top dividend declaring companies,” he said.

Data showed the top 10 listed companies declared increased dividends of between 10 sen and 30 sen per share.

“Nestlé has declared higher dividend per share, rising 12.5% to RM2.70, and PetDag’s dividend increased to 70 sen per share from 60 sen the previous year in tandem with their earnings growth for finanical year 2016,” Lee said.

Dutch Lady announced an unchanged payout of RM1 per share, while British American Tobacco (M) Bhd announced an 80 sen decrease in dividend payout per share to RM2.32.

Lee said during the first-quarter of 2017 (1Q17) earnings season, on aggregate, Bursa Malaysia index constituents delivered strong earnings growth of about 18% year-on-year (YoY).

“As such, investors will generally expect higher dividend payout from a company with improving earnings and future outlook,” Lee added. Although dividend payment is usually correlated with the earnings of a particular company, Lee cautioned dividend payout alone is not a good gauge of a company’s performance. “There are plenty of reasons why a company does not declare a dividend payout, including retaining the earnings for reinvestment and expansion plans. This can translate into shareholders’ profits in term of capital gains,” he noted.

Investors who are seeking growth investment would be interested in these companies.

Bloomberg data showed nine companies had an estimated dividend yield of more than 6% — that includes Ranhill Holdings Bhd with a dividend yield of 13.86%, Country View Bhd with 9.7% and Boustead Plantations Bhd with 9.04%.

Other high yielding dividend stocks include JCY International Bhd, Hektar Real Estate Investment Trust (REIT), YTL Hospitality REIT and Magnum Bhd.

The FTSE Bursa Malaysia KLCI (FBM KLCI) earnings integer is estimated to grow by 7.1% YoY to 108.40 points in 2017 and to rise further by a projected 6% YoY to 114.90 points in 2018.

Its 12-month trailing earnings integer now stands at 106.70 points.

“Hence, at this juncture, the FBM KLCI earnings integer is estimated to increase by merely 1.70 points (from 106.70 to 108.40) during the remainder of this year. We can thus imply that the market is expecting the pace of earnings recovery to taper off fairly perceptibly in the months to come; a view which may be somewhat at odds with the expectation of a still upbeat macro performance going forward,” MIDF Research said in a strategy note last week.

The research outfit is optimistic earnings will beat expectations and be further tweaked upwards in the coming months by the market.

The view is rekindled by the consensus-beating output growth in major Asian economies such as China, which is evident by its 6.9% YoY gross domestic product (GDP) growth in 2Q17.

The outlook for Malaysia’s economy remains sanguine with MIDF’s in-house GDP growth estimate for this year being revised upward to 5.1% from 4.9%, supported by robust external performance and resilient domestic demand.

“Against the backdrop of improving macro environment, we foresee restricted downside risks (in terms of earnings and consequently price) to the equity market.

“The market is expected to regain upward thrust in the final trimester of the year,” the firm’s research noted.

MIDF foresees the FBM KLCI regaining its upward thrust in the final trimester of 2017 to be propelled by continuing earnings recovery, further upward revisions in earnings expectations and macro resilience.

MIDF noted the intermittent cyclical price pullbacks may take place as a result of transient situational issues amid the ever-present noises surrounding the market.

“We reiterate our year-end 2017 FBM KLCI baseline target of 1,830 points, which equates to price-earnings ratio 2017 of 16.9 times and +1.0SD (standard deviation). On this score, the baseline target valuations may further decline going forward in view of the potential upward revisions in earnings,” MIDF added.

It maintains a lower and upper target range of 1,770 and 1,890 points respectively, for the benchmark index.