Dividends expected as earnings season underway

For next 3 weeks, investors will see if firms will loosen their purse strings and reward shareholders, despite tough year


COMPANIES that rake in substantial earnings for the quarter ended Dec 31, 2020, are expected to reward its shareholders with dividends.

With trading set to take leads from the earnings reporting period over the next three weeks, investors will keenly see if corporates will loosen their purse strings and reward shareholders, despite the tough operating year for many sectors.

MIDF Amanah Investment Bank Bhd head of research Imran Yassin Mohd Yusof (picture) said shareholders may expect dividends from companies that continue to perform well and whose financial health remains strong.

Imran Yassin said some sectors or companies have performed better despite the situation, such as glovemakers and Bursa Malaysia Bhd, and have rewarded their shareholders.

“Defensive sectors, such as utilities, will likely continue to declare dividends,” he told The Malaysian Reserve (TMR).

Imran Yassin said minimal changes will be seen on a sequential basis for banks’ earnings in the quarter as provisions may continue to remain elevated.

However, dividends are still expected, given that bank balance sheets and capital ratios remain stable.

“We expect banks that will be announcing their year-end result will declare a final dividend, given balance sheets and capital remain stable. The quantum may, however, be lower due to the weaker earnings,” he said.

Only Malayan Banking Bhd and RHB Bank Bhd announced a dividend for their respective third quarter (3Q) last year, but with institutional shareholders like the Employees Provident Fund and Khazanah Nasional Bhd set to announce their returns soon, there is a general expectation in the market that most large companies may offer returns to such shareholders.

Many of the companies appear to have resumed announcing dividend payout in 4Q, albeit the pay- out rate being lower on average in general.

There are exceptions. LPI Capital Bhd announced a dividend of 44 sen per share for its 4Q ended Dec 31, 2020, amounting to RM175.3 million payable on March 1. This took its total dividend per share declared for financial year 2020 (FY20) to 72 sen compared 70 sen a year earlier.

With LPI Capital’s first interim dividend of 28 sen per share amounting to RM111.5 million paid in August last year, its proposed total dividend payout for FY20 stood at RM286.6 million.

Bursa Malaysia, which posted a net profit of RM377.7 million for FY20, declared a final dividend of 26 sen per share and a special dividend of eight sen per share, amounting to RM210.3 million and RM64.6 million respectively. This brought its total dividend payout for FY20 145% higher year-on-year to 51 sen per share from 20.8 sen per share in FY19.

Supermax Corp Bhd, which is enjoying exponential gains due to higher demand and prices for its gloves, declared an interim single-tier dividend of 3.8 sen per ordinary share for its financial year ending June 30, 2021, to be paid on Feb 26, 2021.

The group’s net profit surged 253% year-on-year to RM1.06 billion in its 2Q ended Dec 31, 2020 (2QFY21) against RM30.56 million in 2QFY19 on the back of high global demand for medical gloves and other personal protective equipment due to the Covid-19 pandemic.

Supermax, analysts forecast, could reward its shareholders with a special dividend in the form of cash or bonus shares in the months ahead.

Real estate investment trusts continue to offer returns despite the weaker operating environment.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng told TMR that dividend payouts for many of the companies on the local exchange will hinge on the companies’ cash-flow and liquidity needs.

Wong said companies that have benefitted from the pandemic, such as the healthcare-related sector, are poised to give shareholders good dividends.

However, some dividend stocks may cut the dividend payout to preserve more cash to fund business operations or for contingency plans. He added that liquidity and sentiment or risk-appetite factors play a role in attracting investors to a stock that may shore up its share prices.

However, some investors would prefer good dividend payers when they demonstrate a healthy cash-flow at current conditions.

“Share prices are affected by liquidity and sentiment in the short term, but the intrinsic value prevails in the long run.

“Many cannot use the normal valuation method such as dividend yield to gauge the short-term valuation in an abnormal time like a crisis period,” he said.

The short supply in semiconductors in the world market now would suggest tech companies on the local exchange could be the next major earning and dividend stocks, as how the strong share price performance of some listed counters on Bursa Malaysia suggest.