The Motley Fool

Which Singapore Bank Has Increased Its Dividends the Most over the Years?

Investors in Singapore’s three big banks, namely, DBS Group Holdings Ltd (SGX: D05), United Overseas Bank Ltd (SGX: U11) and Oversea-Chinese Banking Corp Limited (SGX: O39), also known as DBS, UOB and OCBC respectively, have reason to rejoice. The banks have reported record profits all around amid an environment of rising interest rates and healthy loan growth. And with profits rising, declared dividends have also risen in tandem.

I decided to find out which of the three banks had increased dividends by the highest quantum over the last five years. Firstly, I wanted to determine which bank was ready to reward shareholders with increased dividends when profits rise, and secondly, the idea was also to assess the bank that has the highest potential for raising dividends in the near future.

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Banks’ dividend history

The table above shows that DBS is the bank which raised its dividends by the highest quantum. From 2014 to 2018, dividends have increased by 107% from S$0.58 to S$1.20 per share. For UOB, dividends have increased by 60%, and for OCBC, the increase is just 19.4%. From this simple analysis, it appears that DBS has been the bank most willing to raise its dividend over the years to reward shareholders.

Dividend yields over the years

Another interesting aspect to look at is how the banks’ dividend yields have trended for the past five years. I plotted the closing price of each bank on the last day of the fiscal year against the dividend paid out in that year to obtain the dividend yield.

From the above, DBS was trading at the highest historical dividend yield, while OCBC had the lowest at 3.9%. From my perspective, this could be interpreted in two ways – that DBS or UOB may have to reduce dividends in future as the market is pricing in lower profitability and volume of business, or that OCBC has to raise dividends in future such that the yield increases in line with both UOB and DBS.

Risks abound for all three banks

Though the banks appear to be raising their dividends all around and are all trading at fairly high dividend yields of between 4% and 5%, risks abound in the macroeconomic environment. With a bruising trade war and a potential global economic slowdown, banks could face the prospects of lower rates if the US Federal Reserve decides to cut rates to stimulate growth. Slower growth would also translate to fewer companies willing to borrow, which may negatively impact loan growth rates.

OCBC seems the most interesting bank….for now

While DBS is obviously the “winner” in terms of increasing its dividend over the years, and also boasts the highest dividend yield of the three banks, investors may turn their attention to OCBC instead, which is like the “dark horse”. OCBC can be labelled as the “most conservative” of the three banks in that it has yet to meaningfully raise its dividends. Therefore, investors may have reason to show interest in OCBC if they feel that it may follow its two peers in eventually jacking up its dividends sharply.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of DBS Group Holdings Ltd, United Overseas Bank Ltd and Oversea-Chinese Banking Corp Limited. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.