facebookAn Investor's Ultimate Guide to United Overseas Bank Ltd's (SGX: U11) Dividends

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An Investor's Ultimate Guide to United Overseas Bank Ltd's (SGX: U11) Dividends

profileSudhan P

United Overseas Bank Ltd (SGX: U11), or UOB for short, is one of Singapore’s three leading listed banks.

Here’s a deep-dive into UOB’s dividend yield, dividend history, and more importantly…

… its dividend sustainability to understand if the bank can continue paying rising dividends.

Source: Giphy

UOB Dividend Yield

UOB’s shares last traded at S$25.67 each on 21 September.

At that price, UOB’s trailing dividend yield was 3.9%.

In comparison, the SPDR STI ETF (SGX: ES3) had a lower distribution yield of 2.7% on the same day.

The SPDR STI ETF is an exchange-traded fund (ETF) that tracks the performance of Singapore’s stock market benchmark, the Straits Times Index (STI).

UOB is part of the STI and is its third-largest component at around 11%.

UOB Dividend Amount and Payout Periods

UOB paid out a total dividend of 78.0 Singapore cents per share for its financial year ended 31 December 2020.

The bank’s annual dividend is 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, UOB dished out a dividend of 39.0 Singapore cents per share each for its second and fourth quarters.

UOB Scrip Dividend Scheme

The UOB scrip dividend scheme provides shareholders with the option of receiving their dividends in UOB shares instead of cash.

The bank last offered a scrip dividend for its 2020 fourth-quarter.

Here are the various periods that UOB has offered scrip dividends to its shareholders:

YearDividend Type
2009Final dividend
2010Interim, final, and special dividend
2013Final and special dividend
2015Special dividend
2016Interim and final dividend
2017Interim, final, and special dividend
2020Interim and final dividend

UOB Dividend History 

Now, let’s look at UOB’s dividend payments from 2008 to 2020:

UOB Dividend for YearDividend PeriodDividend Per Share (Singapore Cents)Total Dividend Per Share (Singapore Cents)5-Year Compound Annual Growth Rate (CAGR)
2008Interim dividend20.060.05.7%
Final dividend40.0
2009Interim dividend20.060.0
Final dividend40.0
2010Interim dividend20.070.0
Final dividend40.0
Special dividend10.0
2011Interim dividend20.060.0
Final dividend40.0
2012Interim dividend20.070.0
Final dividend40.0
Special dividend10.0
2013Interim dividend20.075.012.5%
Final dividend50.0
Special dividend5.0
2014Interim dividend20.075.0
Final dividend50.0
Special dividend5.0
2015Interim dividend35.090.0
Final dividend35.0
Special dividend
(for 80th anniversary)
20.0
2016Interim dividend35.070.0
Final dividend35.0
2017Interim dividend35.0100.0
Final dividend45.0
Special dividend20.0
2018Interim dividend50.0120.0N/A
Final dividend50.0
Special dividend20.0
2019Interim dividend55.0130
Final dividend55.0
Special dividend20.0
2020Interim dividend39.078.0
Final dividend39.0

In 2020, UOB and the other banks had to curb their dividend payout after the Monetary Authority of Singapore (MAS) called on them to limit their total dividends per share for 2020 at 60% of 2019’s dividends as a pre-emptive measure.

Banks were asked to offer scrip dividends as well.

A year later, in July 2021, Singapore’s central bank lifted the dividend restrictions entirely.

Thus for UOB’s 2021 second-quarter (results announced in August), the bank paid out 60.0 Singapore cents per share, up 54% compared to a year ago.

The UOB scrip dividend scheme was also suspended.

UOB Dividend Policy

According to UOB’s annual report, the bank aims to “provide sustainable returns to our shareholders for their investment as we balance the long-term strategic growth opportunities and proactive management of capital”.

The bank plans to dish out 50% of its net profit as dividends (also known as dividend payout ratio), provided its common equity tier 1 (CET-1) ratio — a measure of a bank’s financial strength — is above 13.5%, and it has a stable outlook.

UOB’s CET-1 ratio has been above 13.5% over the last four years at least.

UOB Dividend Sustainability

A company’s dividend sustainability is more important than its dividend yield since a high yield, while enticing, could also mean there are issues with its underlying business.

With that, let’s explore UOB’s dividend sustainability by exploring its dividend payout ratios from 2016 to 2020:

 20162017201820192020
Earnings Per Share (S$)1.861.992.342.551.69
Total Dividend Per Share (S$)0.701.001.201.300.78
Dividend Payout Ratio37.6%50.3%51.3%51.0%46.2%

UOB’s dividend payout ratio has been conservative at around 50%. As such, its dividends are indeed sustainable.

Companies that pay below 100% of their earnings would leave some room for dividend increases in the future, even if their profits were to fall.

Looking for a Like-Minded Community of Investors?

That’s what we have here at Seedly, where you can participate in lively discussions regarding bank stocks and everything money!

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.

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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