Cover: Dividend payments continued despite uncertain times
IN 2021, although this was the peak of the Covid-19 pandemic, which caused massive disruption to the global economy, publicly listed companies – in which the government or public funds hold more than 15% stake – continued to reward their shareholders with generous dividends.
Surprisingly, some even paid higher dividends year after year instead of holding onto cash during tough economic conditions (see charts).
The generous dividends will no doubt be helpful to shareholders when cash flow is tight, if not stretched, in the current difficult times.
Malayan Banking Bhd (Maybank), in which Permodalan Nasional Bhd has a 41.1% stake, has maintained its payout ratio above 80% for the past three years. The banking group has distributed total dividends of RM19.94 billion for the three-year period between 2019 and 2021 – possibly the highest total dividends paid by a listed Bursa Malaysia during this period.
The total dividend of RM19.94 billion was more than double the RM8.3 billion that Public Bank Bhd – another bank known for paying regular dividends – reported, according to annual reports. It should be noted that the Employees Provident Fund (EPF) is the second largest shareholder of Public Bank with a 15.2% stake, after founder Tan Sri Teh Hong Piow, who owns 23.41%.
RHB Bank, in which EPF holds a 42.14% stake, increased its payout ratio to 63% in the year ended December 31, 2021 (financial year 2021), from 35% in financial year 2020 and 50% in fiscal year 2019. RHB Bank paid out RM1.64 billion in fiscal year 2021, a jump from RM708 million in fiscal year 2020 and RM1.243 billion during the 2019 financial year.
The dividend payout ratio of Malaysia Building Society Bhd (MBSB), of which EPF is also the majority shareholder with a 65.7% stake, increased its dividend payout ratio to 81% in fiscal 2021 , or RM355 million, compared to 75% in FY2020 (RM201 million) and 45% (RM320 million) in FY2019. The financial group declared total dividends of 876 million RM over the past three years.
CIMB Group Bhd, in which Khazanah Nasional Bhd has a 25.72% stake and EPF 15.32%, is the third most generous bank among Bursa-listed banks. The banking group has paid out a total of RM5.35 billion in the last three financial years, RM2.55 billion (26 sen per share) in 2019, 477 million RM (4.8 sen per share) in 2020 and RM2.32 billion (22.99 sen per share) in the 2021 financial year.
Tenaga Nasional Bhd is probably the dark horse. Over the past three financial years, the utilities group has declared total dividends of RM12.54 billion – the second highest among companies whose major shareholders are either government-controlled entities or public funds. Tenaga’s dividend payout ratio increased to 126% and 127% in fiscal 2019 and 2020, with dividends of 80 sen (including a special dividend of 40 sen) and RM1 (including a special dividend of 50 sen) respectively. Khazanah Nasional Bhd holds a 25.58% stake in Tenaga, while EPF holds 16.02%, Amanah Saham Bumiputra holds 9.73% and Kumpulan Wang Persaraan (Diperbadankan) (KWAP) holds 7.32%.
It should be noted that while Tenaga has declared generous dividends, its borrowings have also increased. The group’s total borrowings increased by RM5.59 billion over the past three years to reach RM53.4 billion at the end of 2021.
Shareholders of IJM Corp Bhd are among those laughing to the bank after the pleasant surprise of a special dividend paid on December 30, 2021. The construction giant declared a special dividend of 15 sen per share this months after selling its stake in IJM Plantations Bhd.
For its fiscal year ended March 31, 2022, IJM Corp declared a first interim dividend of two sen and a second interim dividend per share of four sen, in addition to the special dividend. In total, the group paid out RM766 million in dividends for this financial year, during which its two major shareholders – Amanah Saham Nasional Bhd (17.31%) and EPF (17.05%) – were expected to receive around RM130 million. RM each.
Axis Real Estate Investment Trust (Axis REIT) and Bermaz Auto Bhd are both on the list under review, as the EPF is their largest shareholder, holding 16.03% and 18.26% stakes respectively.
Both companies managed to continue their dividend payments despite a difficult operating environment.
For the year ended April 30, 2022, Bermaz paid a special dividend of 2.5 sen, bringing the total dividend per share declared to 8.75 sen or RM102 million. The automaker distributed 6.50 sen in dividend per share in fiscal 2021 and 7.45 sen per share in fiscal 2020. A calculation on the back of the envelope shows Bermaz rewarded shareholders with total dividends of RM264 million between FY2020 and FY2022.
Axis REIT declared RM381 million in total dividends over the three fiscal years from December 31, 2019 to December 31, 2021. Its payout ratio increased to a high of 89% in fiscal 2020 from 56% in in fiscal year 2019. Its ratio was 69% in fiscal year 2021.
Among the listed entities owned by Petronas, Petronas Chemicals Group Bhd declared the highest dividend and ranks fourth on the review list. The downstream petrochemical player, which has a net cash position of RM12 billion, paid out a total of RM6.88 billion for the three fiscal years between fiscal 2019 and fiscal 2022, with ratios of distribution ranging from 51% to 61%.
Although sister company Petronas Gas Bhd (PetGas) paid RM5.75 billion, less than PetChem’s payment, its payout rate was much higher, exceeding 80% in the three years under review. The ratio reached 125% in fiscal 2020. Nevertheless, PetGas is also in a net cash position.
Petronas’ shipping arm, MISC Bhd, declared total dividends of RM4.41 billion over the last three financial years with a constant annual dividend of RM1.47 billion, although it slipped into the red in the during the 2020 financial year.
Petronas Dagangan Bhd’s dividend payout ratio exceeded 100% for the three years under review with total dividends amounting to RM1.91 billion. The ratio was 102% in fiscal year 2019, 137% in fiscal year 2020 and 131% in fiscal year 2021. Similarly, the group also declared a special dividend of 15 sen per share in fiscal year 2019, bringing the total dividend per share to 85 sen.
The five listed entities in which Petronas has a majority stake, namely PetChem, PetGas, MISC, PetDag and KLCCP Staple Group, have collectively declared total dividends of RM20.78 billion over the past three financial years.
Dr. Yeah Kim Leng, professor of economics at Sunway University Business School, points out that the 2022 national budget estimated that the government would receive RM39.5 billion, including a RM25 billion contribution from Petronas, in the form of revenue. interest, dividends and return on investments, which is an increase from RM36 billion in 2021.
Dividends and return on investment accounted for about 16% of government revenue in 2021, Yeah says. “Given that the average price of Carpet Blend crude oil in the first five months is up just over 25% from last year’s average price, Petronas’ dividend can therefore potentially increase by 5 additional billion RMs.
“Dividends from state oil company Petronas, Khazanah and other government-linked companies are expected to be higher this year due to higher crude oil and gas prices and higher profits due to a stronger economic growth,” comments Yeah.
He notes that as long as dividend payments do not disrupt capital investment plans and worsen the capital structure of publicly traded companies or government-linked companies, such dividend payments help to improve the management of public finances and the country’s budgetary stability.
Shankaran Nambiar, senior researcher at the Malaysian Institute of Economic Research (MIER), agrees that GLCs could be tapped for their dividends as an alternative source of non-tax income.
However, he warns that it may not be a “totally reliable” source of income. Additionally, windfall dividends are unlikely to be sustainable, particularly in circumstances where the payout ratio exceeds 100%.
“When a company’s dividend payout ratio is greater than 100%, it pays dividends in excess of its earnings. This is not sustainable and the company will have to cut its generous earnings.
“Second, as the economy shifts into lower gear, as it would when we encounter more difficult circumstances, corporate dividend payouts will plummet,” Nambiar comments, noting that it will be detrimental to companies if their balance sheets are overloaded due to an excessive dividend. Payments.