Oversea-Chinese Banking Corp Limited's (SGX: O39) Dividends: Everything You Should Know
Right now, let’s look into the Singapore bank’s dividend yield, dividend history, and more importantly…
… its dividend sustainability to understand if OCBC can continue dishing out increasing dividends.
OCBC Dividend Yield
The OCBC share price closed at S$11.61 apiece on 1 September.
At that stock price, the bank’s trailing dividend yield was 3.5%.
To put things into perspective, the SPDR STI ETF (SGX: ES3) had a lower distribution yield of around 2.7% on the same day.
OCBC is part of the STI and is its second-largest component at around 14%.
OCBC Dividend Amount and Payout Periods
For its financial year ended 31 December 2020, OCBC dished out a total dividend of 31.8 Singapore cents per share.
The bank’s annual dividend is usually split into two parts – one part (interim dividend) is given out for the second quarter and the other for the fourth quarter (final dividend).
Last year, OCBC paid out a dividend of 15.9 Singapore cents per share each for the second and fourth quarters.
In the 2021 second-quarter, OCBC paid out 25.0 Singapore cents per share after the Monetary Authority of Singapore (MAS) lifted the dividend cap for local banks and finance companies.
In July 2020, OCBC and the other banks had to curb their dividend payout after Singapore’s central bank called on the financial institutions to limit their total dividends per share for 2020 at 60% of 2019’s dividends as a pre-emptive measure.
OCBC Scrip Dividend Scheme
The OCBC scrip dividend scheme provides shareholders with the option of receiving their dividends in shares instead of cash.
OCBC last offered a scrip dividend in the fourth quarter of 2020.
Here’s a look at all the periods that OCBC has offered scrip dividends:
|2009||Both interim and final dividend|
|2010||Both interim and final dividend|
|2014||Both interim and final dividend|
|2015||Both interim and final dividend|
|2018||Both interim and final dividend|
|2020||Both interim and final dividend|
OCBC Dividend History
Now, let’s explore OCBC’s dividend payouts from 2008 to 2020:
|OCBC Dividend for Year||Dividend Period||Dividend Per Share (Singapore Cents)||Total Dividend Per Share (Singapore Cents)||5-Year Compound Annual Growth Rate (CAGR)|
Over the years, OCBC has paid consistently growing dividends.
In 2008, the bank paid out 28.0 Singapore cents per share in total dividends.
That grew to 53.0 Singapore cents per share in 2019, giving a CAGR of around 6%.
In 2020, OCBC dished out a total dividend per share of 31.8 Singapore cents, which is 60% of the previous year’s dividend (in line with the MAS cap).
OCBC Dividend Policy
The following shows OCBC’s dividend policy, as stated in its annual report:
“Our dividend policy aims to provide shareholders with a sustainable and progressive dividend that is consistent with our long term growth.”
OCBC’s dividends are indeed sustainable, as we will see next.
OCBC Dividend Sustainability
Given OCBC’s conservative dividend payout ratio, its dividends are well-protected.
Companies that pay below 100% of their earnings would leave some room for dividend increases in the future, even if their earnings were to fall.
Here, let’s look at OCBC’s dividend payout ratios from 2016 to 2020:
|Earnings Per Share (S$)||0.82||0.95||1.06||1.12||0.80|
|Total Dividend Per Share (S$)||0.36||0.37||0.43||0.53||0.318|
|Dividend Payout Ratio||43.9%||38.9%||40.6%||47.3%||39.8%|
OCBC’s dividends are well-covered as it has paid out below 50% of its earnings as dividends over the last five years.
As long as OCBC continues to grow its earnings, it should increase its dividends over time, in line with its dividend policy. This is evident from its historical dividend trend as well.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer doesn’t own shares in any companies mentioned.