FINANCIAL stocks and real estate investment trusts (Reits) could post the sharpest falls in dividend yields this year, DMG & Partners Securities says in a report.
On average, the banks could post a 2.9 percentage-point drop in yields, while Reit yields could fall 3.4 percentage points.
DMG says this comes after surprising cuts in payouts by some high-yielding stocks in the fourth quarter of last year.
‘We believe dividend payout ratios will be similar to those in FY’08 across most industries, given that most already cut them last year,’ it says. ‘What will take the wind out of the yields will be declining earnings per share, as we expect the market to fall some 14 per cent.’
Amid expectations of higher provisions, Singapore’s three banks are likely to pay up to half of their FY’09 earnings as dividends to shareholders, says DMG.
‘However, due to earnings compression, FY’09 dividends will be sharply lower versus FY’08,’ it says. And this means yields for the banks’ stocks will fall to the 4-5 per cent range, from 6-9 per cent last year.
DMG says that while the Reit sector is trading at record FY’09-FY’10 yields of about 13 per cent, this is due to ‘massive corrections in share prices’.
‘We are not removing the possibility of downside pressures to distribution per unit in the near term,’ it says.
DMG recommends big-cap Reits such as A-Reit and CapitaMall Trust which have locked in a ‘considerable amount’ of their FY’09 distributable income.
Yields in the telecommunications and land transport sectors are likely to hold steady, DMG reckons.
Although the dividend yield for the telecom sector is set to decline to 7.4 per cent this year from 7.7 per cent in FY’08 amid poorer earnings, telcos are reporting strong free cash flows, it notes.
SingTel has indicated a 45-60 per cent dividend payout range, while MobileOne has set a minimum ratio of 80 per cent.
StarHub will keep its dividend at 18 cents per share for FY’09, or 103 per cent in payout ratio, which exceeds its ratio last year of 98 per cent as its earnings are set to drop, says DMG.
It says the only increase in yields will be in the land transport sector, where they are expected to rise to 5 per cent this year from 4.3 per cent in FY’08, noting that this growth is from a low base.
On a percentage basis, DMG expects SMRT to disburse more of its earnings to shareholders than ComfortDelGro. SMRT is set to dish out 85 per cent of earnings against ComfortDelGro’s 55 per cent, it says.
The FY’08 dividend payout ratio for SMRT was 79 per cent, while ComfortDelGro’s was 52 per cent.
No comments:
Post a Comment