Strong dividend growth in Singapore amid uncertainty
• Constituents in MSCI Singapore set to pay SGD 16.8bn in
ordinary dividends for 2019, up 7.4% on 2018
• Banks drive dividends in Singapore, offset by lower payouts from
Financial Services, Media and Travel & Leisure sectors
• MSCI Singapore trades at a dividend yield of 3.6%, ranked second
among indices within the Asia Pacific region
Against a backdrop of uncertainty stemming from global trade
tensions, authorities in Singapore downgraded their forecast for
economic growth to a range between 1.5% to 2.5%. The modest outlook
is in line with the latest PMI reading, which showed a contraction
in Singapore's manufacturing industry for the second consecutive
month. The dividend outlook however, illustrates a contrasting
picture as we are projecting ordinary dividends from MSCI Singapore
companies to grow for the third consecutive year to SGD 16.8bn in
2019. Including special payouts, we are expecting total dividends
to come in at SGD 17.3bn. 
Banks, telecommunications and
property-related companies anchor dividends from MSCI Singapore,
accounting for almost three-quarters of the payouts from the
25-member index. The estimated 7.4% jump in ordinary dividends is
primarily attributed to our bullish forecasts on the payouts from
banks, although we are seeing muted dividend growth from the second
and third largest dividend paying sectors. 
Banks continue to drive dividend
growth
Singapore's dividend trajectory is heavily influenced by the big three Singapore banks as these lenders contribute 44.4% of payouts from MSCI Singapore. On the back of strong fundamentals and a positive earnings outlook, ordinary dividends from DBS Group Holdings (DBS), United Overseas Bank (UOB) and Oversea-Chinese Banking Corporation (OCBC) are projected to reach a multiyear high of SGD 7.5bn, which translates to a year-on-year increase of 18.7%. Total dividends will however, fall by 1.4% due to the absence of a SGD 1.3bn one-off special dividend, announced by DBS in February last year.
Dividends from property developers are stable; Real Estate Investment Trusts (REITs) outlook is positive
Dividends from property developers account for around 32.5% of the sector dividends in 2019. Distributions from Capitaland Limited (Capitaland), City Developments Limited (City Developments) and UOL Group Limited (UOL) were either flat or higher in recent years. This underscores their intention to pay dividends on a sustainable basis and is supported by their high level of recurring income. For 2019, we are forecasting ordinary dividends from these three property developers to amount to SGD 721m or SGD 829.9m if we were to include the regular special dividends from City Developments.
We are forecasting distributions from REITs to amount to SGD 1.5bn this year, translating to a year-on-year increase of 0.5%. The modest growth is mostly due to the decline in distribution from Capitaland Mall Trust (CMT), attributed to an advanced distribution announced in October last year.
Distributions from Telecommunication sector subdued
The telecommunication sector is represented by Singapore
Telecommunications (Singtel) and accounts for 16.9% of aggregate
dividends. We are expecting Singtel to keep its ordinary dividends
flat for the fifth consecutive year and are forecasting the company
to pay SGD 2.5bn in dividends this year. This is consistent with
guidance from the company, which states Singtel will maintain its
dividends at SGD 0.175 per share till FY20. 
Dividend cuts from three sectors
- Financial Services, Media and Travel & Leisure
The Financial Services sector is represented by Singapore Exchange and we are projecting dividends to fall by 7.7% to SGD 321m. This is however due to the split pattern of its dividends and not a reflection of any deteriorating fundamentals.
The media sector is represented by Singapore Press Holdings (SPH); we are expecting total dividends to come in at SGD 161.5m in 2019, reflecting our expectation that dividends will fall for the sixth consecutive year.
Dividends from the Travel & Leisure sector have been erratic, due to the volatility in Singapore Airlines (SIA)'s distributions. Elsewhere, both ComfortDelgro Corporation and Genting Singapore Limited have a history of growing its dividends steadily and we expect this practice to continue going forward. We are pencilling in a 0.9% increase in dividends from these two companies to SGD 652.6m in 2019
How does MSCI Singapore perform against other indices?
MSCI Singapore trades at a dividend yield of 3.7% and is ranked second among indices around the region. MSCI Australia generates the highest yield at 4.1% and this suggests that on average, companies in these two countries are more generous when it comes to rewarding shareholders.
To access the report, please
contact dividendsupport@ihsmarkit.com
Chong Jun Wong, CFA, Senior Research Analyst at IHS Markit
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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.