Can CapitaMalls Asia Deliver Bigger Dividends Soon?

As one of Asia’s largest retail mall developer, owner, and manager, CapitaMalls Asia (SGX: JS8) also counts itself among some of Singapore’s biggest publicly-listed entities given its status as one of the 30 constituents within the Straits Times Index (SGX: ^STI).

In addition, the company manages and owns three publicly-listed real estate investment trusts, namely, CapitaMall Trust (SGX: C38U), CapitaRetail China Trust (SGX: AU8U) and CapitaMalls Malaysia Trust. The three REITs have a focus on retail malls in Singapore, China, and Malaysia respectively.

CapitaMall Trust CapitaRetail China Trust CapitaMalls Malaysia Trust
Place of listing Singapore Singapore Malaysia
Total assets S$10.0b S$2.18b S$1.25b
CapitaMalls Asia’s ownership stake* 27.6% 25.8% 36.0%
*As of 30 Sep 2013

Source: S&P Capital IQ; CapitaMalls Asia’s website.

CapitaMalls Asia is a relatively new public company given that it was listed on the Mainboard exchange here barely four years ago on 25 Nov 2009 at a listing price of S$2.12. Since then, it has unfortunately not been a really good investment as its shares are down by 19% to its current price of S$1.72 even as the general market, represented by the Straits Times Index, has climbed some 6%.

Nonetheless, CapitaMalls Asia has quite the record in growing its dividends since its listing, as seen below

Year Dividends per share (Singapore cents)
2009 1.00
2010 2.00
2011 3.00
2012 3.25

Source: S&P Capital IQ

The company would be releasing its full-year results soon on 13 Feb 2014, and given such a dividend record, it seems natural to question if that streak can continue.

In CapitaMalls Asia’s 2012 annual report, the company laid out its capital management policy. Under the policy, the company “monitors the return on capital, which [is defined] as total shareholders’ equity, excluding non-controlling interests, and the level of dividends to ordinary shareholders.”

A clue on how management monitors dividends could perhaps be gleaned from CapitaMalls Asia’s pay-out ratio – the percentage of earnings paid out as dividends. And, it has been increasing since 2009.

Year Pay-out ratio
2009 7.20%
2010 14.4%
2011 25.6%
2012 23.0%

Source: Company annual report

For the six months ended 30 June 2013, CapitaMalls Asia had declared an interim dividend of 1.75 Singapore cents a share, some 7.7% higher than the 1.625 cents paid out for the first half of 2012.

Over the past three quarters of 2013, the company has seen its revenues grow 11.8% year-on-year to S$276.7m wile profits actually moved up 6.2% to S$383.6m. In the third quarter earnings release, CapitaMalls Asia mentioned that its key markets, namely Singapore, China and Malaysia, “are expected to perform well in 2013, on the back of sustained tenant sales growth.” If that eventually translates into profit growth for the whole of 2013 and the company maintains the pay-out ratio in the same ball park as 2012’s, investors could be looking at higher annual dividends come 13 Feb 2014.

But here’s something else to note. Even if CapitaMalls Asia’s dividends do grow, at a price of S$1.72, its shares are fetching a historical dividend yield of only 1.9% based on its 2012 pay-out. Assuming its share price remains constant, the company’s dividends would have to undergo some serious growth before it can match the average yield in the market of around 2.9%.

In any case, it should really be stressed that investors would only know for sure how those dividends would look like when CapitaMalls Asia actually releases its full-year earnings results.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.