Higher EPF dividends expected

PETALING JAYA: With the Employees Provident Fund (EPF) recording a stronger performance in the first nine months of the 2023 financial year (FY23), experts are anticipating a higher dividend declaration this year.

The dividend announcement is expected to be made in early March.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid expects the dividend rate to be between 5.5% and 6% for both conventional savings.

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“I suppose 5.5% to 6% would be a reasonable target considering the double-digit increase in income,” he said.

The EPF reported a 19.34% year-on-year increase in total investment income to RM14.67bil in the third quarter of last year after netting off write-downs.

For the nine months to Sept 30, 2023, investment income came up to RM47.86bil, which was 33% higher than RM36.04bil recorded in the same period in 2022 after netting off listed equity write-downs, said the retirement fund.

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Some RM4.62bil of the investment income was generated from mark-to-market (MTM) gains of securities that have not been realised, due to the fluctuation of foreign exchange rates.

As such, Mohd Afzanizam said a better dividend payout can be expected.

“We shall expect a better EPF dividend this year. Already, the EPF has recorded a 33% increase in total investment income for the first nine months of 2023,” he said.

“Plus, 38% of its asset allocation is exposed to the global markets and given that global equities have done well in 2023, it should positively contribute to the EPF income last year. Hence, we can expect a better dividend rate from EPF.

“As for syariah, it could reach between 5% and 5.5%,” he added.

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Meanwhile, a financial expert who declined to be named said if the EPF reports an investment income of about RM60bil based on an Asset Under Management (AUM) of RM1.1 trillion for FY23, then a 5.5% dividend can be expected.

However, he said if the investment income for FY23 hits RM66bil, then the dividend declared could be up to 6%.

“While this is the calculation, it depends on performance and decisions to declare how much of this gain will be distributed as dividends,” he added.

Malaysia University of Science and Technology (MUST) economist Prof Dr Geoffrey Williams said investment portfolios, such as the EPF, have a strategic asset allocation (SAA) policy that splits across various investments in different countries.

This means that they will invest in fixed-income assets, government securities, stock markets, real estate and even venture capital in Malaysia and overseas, he said.

“The economic conditions have raised interest rates on fixed deposits slightly, equities overseas have been strong, the Dow Jones was up 16.5% and the S&P 500 was up 24%. The Kuala Lumpur Composite Index (KLCI) was up around 7%.

“Economic trends are only mildly linked to investment returns because these depend more on specific companies than on the overall economy.

“Even if the economy is weak, some companies do well, so there is not a short-term direct link.

“We hope for a good return of around 5.5% to 6%, perhaps more,” said Prof Williams.

The EPF declared a dividend rate of 5.35% for conventional savings for 2022, with a total payout amounting to RM45.44bil, as well as a 4.75% dividend rate for syariah savings, with a payout amounting to RM5.7bil.

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