The Employees Provident Fund (EPF) is expected to announce a dividend at Menara KWSP Kwasa Damansara. (Mac 1 2024) — ART CHEN/The Star
PETALING JAYA: The Employees Provident Fund (EPF) is expected to declare higher 2024 dividends on the back of a strong investment performance, with analysts predicting payouts up to 6% for conventional savings and 5.60% for syariah funds.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid is anticipating the low end of the dividends to be 5.60% for conventional savings and 5.50% for syariah accounts.
“Given that the EPF’s gross investment income grew by 20% in the first nine months of 2024, I believe the pension fund should be able to declare higher dividend rates for its members,” he said.
Mohd Afzanizam noted that the equities market, which significantly contributes to EPF’s investment income, has performed well in both global and domestic markets.
On the domestic front, stable interest rates, with the Overnight Policy Rate remaining at 3% throughout 2024, have further supported returns from fixed income and money market instruments.
“I suppose 5.6% to 5.8% for conventional savings and 5.5% to 5.6% for syariah funds appears to be a reasonable range that we can expect from EPF,” Mohd Afzanizam said.
“This is well above the long-term average inflation rate of 2.5%, which should serve as the minimum yardstick to evaluate EPF’s dividend performance.”
He stressed the importance of encouraging members to continue saving with EPF to benefit from compounding.
Mohd Afzanizam said this means withdrawals should be minimised to allow savings to grow with reinvested dividends.
For 2023, EPF declared dividends of 5.5% for conventional savings and 5.4% for syariah savings.
Areca Capital chief executive officer Danny Wong also predicts a higher dividend payout, although he is tempering expectations.
“Expect a higher dividend although it may not be much. Last year was a strong year for equities,” he said.
Meanwhile, a fund manager who declined to be named projects conventional savings dividends to reach as high as 6%.
“It’s not a conservative forecast, but a 6% payout is possible,” he said.
EPF reported an investment income of RM57.57bil for the nine months ending Sept 30, 2024, reflecting a 20% increase from RM47.86bil in the same period in 2023.
In the third quarter alone, its investment income rose to RM19.67bil, up RM5bil from RM14.67bil in the same period in 2023.
The provident fund reported that its equity investments remained a major income driver in Q3 2024, generating RM18.32bil – nearly double the RM9.17bil recorded in Q3 2023. This highlights EPF’s proactive strategy in capitalising on market volatility and benefiting from the positive momentum in equity markets.
Fixed income investments, which play a crucial role in capital preservation, have served as EPF’s anchor by providing a steady income stream and mitigating the impact of short-term market fluctuations.
This asset class, comprising Malaysian Government Securities and equivalents, as well as loans and bonds, contributed RM6.51bil, or 33% of EPF’s total investment income for Q3 2024.
Dr Geoffrey Williams, founder and director of Williams Business Consultancy, said EPF’s interim results were robust, on the back of a good investment strategy, portfolio rebalancing and strong overseas returns.
“So we can look forward to a higher dividend than last year, potentially around 5.8% to 6.2% for conventional savings and 5.7% to 5.9% for syariah savings,” he predicted.
