Trickle-down effect on TNB’s record-high dividend policy

Country’s largest power rm has announced a final dividend of 44 sen per share, completing FY17 with a stunning dividend return of 61 sen


Tenaga Nasional Bhd’s (TNB) surprised the market with a revised dividend policy and a record-high dividend payout for the financial year ended Aug 31, 2017 (FY17), which analysts said would have significant trickle-down effects, injecting billions into the economy and boosting consumer spending.

Malaysia’s largest power company has announced a final dividend of 44 sen per share, completing the financial year with a stunning dividend return of 61 sen, the highest for the utility giant.

The board of the second-largest listed company, based on market capitalisation, had decided to increase the current dividend payout range to 30%-60% from the previous 30%-50% policy. The utility company’s proposed 44 sen per share as a final dividend amounts to RM2.49 billion, more than doubled compared to the RM1.24 billion paid in the previous year’s fourth quarter (4Q).

The final dividend payout for FY17 took the company payout to a record high of 61 sen per share or RM3.5 billion, nearly double the 32 sen dividend per share paid in the previous financial year.

TNB chairman Tan Sri Leo Moggie said the RM3.5 billion dividend payout would directly benefit TNB share- holders such as the Employees Provident Fund (EPF), Permodalan Nasional Bhd (PNB), Retirement Fund Inc (KWAP) and Lembaga Tabung Haji (TH).

He said the dividend payout would “enrich the rakyat” as the account holders of these institutions.

Majority of TNB’s shareholders are government-linked funds with Khazanah Nasional Bhd holding 28.14% stake or 1.59 billion shares, EPF (11.18%), KWAP (5.5%), TH (2.3%) and PNB (1.25%), according to Bloomberg’s latest data.

Based on The Malaysian Reserve’s (TMR) calculations, EPF will get about RM418.1 million from TNB’s dividend payout, KWAP RM205.7 million, and TH RM79.3 million from TNB’s 2017 total dividend distribution of 61 sen.

These funds represents the country’s total population and a high-dividend policy will ensure better dividends payout by these funds to their contributors.

Bank Islam Malaysia Bhd (BIMB) chief economist Dr Mohd Afzanizam Abdul Rashid lauded the revision of TNB’s dividend policy as it showed an efficient capital management and would result in better return on equity (ROE) and equity valuation.

“Investors — both institutional and individual — would certainly be well compensated via higher dividend yield, which would help improve their total investment returns in TNB shares.

“This in turn would result in higher capacity among the institutional investors to give better dividend to their stakeholders,” he told TMR recently.

Dividend a Boost to Stakeholders


TNB’s dividend payout has been on the rise over the last six years. The power company paid a total annual dividend of 4.5 sen per share in FY11. The rate rose to 20.09 sen per share the following year.

The dividend inched upwards to 25 sen in FY13, and was maintained at 29 sen in FY14 and FY15. As a government-linked company (GLC) and shareholding that accounts for the majority of the population, TNB raised the pay- out to 32 sen in FY16 before raising it to 61 sen in FY17.

Over the last six years, the country’s oldest utility company’s dividend has soared 1,256% from 4.5 sen per share to the recent 61 sen per share, distributing billions into shareholders’ coffers.

The increased dividend like TNB’s would especially benefit the lower-income groups, Sunway University Business School economics Professor Dr Yeah Kim Leng said.

The high dividend would provide a much-needed boost to their disposable income, especially with the rising cost of living.

“This will help them cope with the rising cost of living. It also depends on the amount these individuals hold in the group. Nevertheless, it is still an injection into the economy that will generally be positive in terms of sustaining consumer spending,” he told TMR.

Yeah said investment funds are also expected to declare higher dividends in light of the improved pay- out and better than expected gross domestic product growth of 6.2% in the 3Q of this year.

“Dividends will likely be maintained, though for GLCs, the payout will probably be higher,” Yeah said. TNB’s dividend policy aims to allow shareholders to participate in the company’s profits.

The group said its ability to pay dividends is also dependent on the dividends received from its subsidiaries, which in turn would depend on the subsidiaries’ distributable profits, operating results, financial condition, capital expenditure plans and other relevant factors.

Besides TNB’s high dividend distribution, its share prices have risen from a low of RM13 in the last 12 months to RM15.56, valuing the company with a whopping market capitalisation of RM87.6 billion.

Research houses have also been favourable to TNB. UBS Investment Bank chose TNB as one of its preferred stocks in “special situations”.

Affin Hwang Research said the 44 sen dividend announcement was “a positive surprise”, and the full-year payout at 61 sen was above the 51 sen consensus it was expecting. “We view the decision to pay out at the higher end of the range as positive,” Affin Hwang said.

Confidence in TNB is expected to rise further as the funds representing the majority of the country’s population enjoy better returns in the future.