Already starting? We highlighted several weeks ago that the reporting season for the April-June quarter is unlikely to bring significant stimulus in terms of earnings performance, although dividends could surprise on the upside. This is as we notice a trend of companies raising dividend payouts, partly heeding the call from various quarters, and partly reflecting the build-up of cash surplus as re-investment opportunities appear harder to come by nowadays.
As it is, BAT (RM41.00) started the ball rolling when it raised interim net dividend payout by 12% to RM1.08 per share, providing a net yield of 2.6%. For the full year, BAT is well on track to offer more than 6% net dividend yield, doubling the prevailing level of cash returns.
With the reporting season gaining momentum in the coming weeks, who else could spring pleasant dividend surprises for shareholders? This is indeed the focus of our write-up.
More than 2% upcoming net dividend yield for?Combing through the universe of Surf88’s coverage, we have compiled a list of generous payers set to declare dividends, together with their results announcements, in August. On the basis of at least 2% net yield for the upcoming dividend as the minimum selection criteria, we have tabulated a list of nine companies in the following table.
?nine fundamental names. As can be seen, all nine are fundamentally strong companies typically backed by strong balance sheets with net cash, although the immediate earnings outlook may not be too inspiring for quite a few of the candidates. The latter would include Guinness Anchor (Guinness) (RM3.96), IOI Properties (RM6.40), JT International (RM3.88), Sime UEP (RM4.20) and Tractors (RM2.63).
BUY Guinness, Oriental Holdings, Sime Darby, YTL Cement and YTL Power. In the case of Guinness, we see its compelling net dividend yield exceeding 7% in a full-year as more than offsetting the lacklustre earnings outlook to support our BUY call. In the upcoming dividend to be announced later this month, we should already expect close to 5% net yield.
We are also BUYer of Sime Darby (RM5.00) and would not rule out the possibility of upside from our estimated 2.7% net dividend yield (full-year of 3.4%). Meanwhile, even though Oriental Holdings (RM4.34) may not surprise in the pending interim dividend, it is not unreasonable to expect the company to be more generous in the final dividend to be announced six months down the road, given net cash of more than RM1 per share.
Elsewhere, we would also maintain BUY on YTL Cement (RM3.86) and YTL Power (RM3.10) which are expected to at least maintain net dividend at 14.4 sen per share in the upcoming results, translating to net yield of 3.7% and 4.6% respectively.
What about EON? Also worth a mention is EON (RM8.70), which should offer 2.1% net interim dividend yield based on net payout of 18 sen per share which has been maintained for the past few years.
However, we would not be entirely surprised to see lower payout this year following the recent distribution of Cycle & Carriage Limited as dividend-in-specie (cash equivalent of RM1.41 per EON share on a net basis), and further in view of reduced profitability. Even as we keep an eye on the upcoming dividend, we would maintain BUY on EON on the back of its attractive earnings and asset valuation.
Against historically low interest rates, we believe dividend yields would be increasingly in focus and it is not inconceivable that high dividend paying companies would be accorded a gradual premium over time. Yield seekers should especially keep an eye.
Did you find this article insightful?