DBS, OCBC, UOB dividend yields: What are the latest estimates?

In a recent update on Singapore’s three main money lenders – DBS Group, Oversea-Chinese Banking Corp (OCBC) and United Overseas Bank (UOB), we had examined their respective stock and business prospects for the next two years.

This week, we provide a new update on the banks’ expected dividend yields, and how pay-outs will be impacted by Monetary Authority of Singapore’s (MAS) recent directive for dividends per share (DPS) to be capped at 60% of FY2019’s sum.

DBS Group’s estimated 2020 dividend yield: 3.53%

DBS Group's high loan loss provisions in the first quarter resulted in a 29% drop in net profit. This in turn led the bank to lower dividends by the largest percentage (out of the three banks) in Q2.

The group proposed an interim one-time tax-exempt dividend of S$0.18 per share, 40% below the amount of S$0.30 paid a year prior.

Under MAS’ guidelines, the maximum DPS that DBS can declare for FY2020 would be S$0.738, against FY 2019’s total DPS of S$1.23.

This would equate to a maximum dividend yield of roughly 3.53% this financial year – the lowest among the three banks, based on 01 September 2020’s closing share price of S$20.88.

Comparing the three banks, CIMB brokers wrote that they preferred DBS over UOB and OCBC in terms of DPS outlook, despite the lower yield estimate.

They have their ‘hopes up for a recovery’ in DBS’ full-year dividends for FY2021, as the bank was already confident of sustaining its DPS amount prior to MAS’ directive.

In terms of share price outlook, the DBS stock currently has an average 12-month price target of S22.96 from 20 analysts polled by Bloomberg. This represents an upside of 9.96% from the last traded price of S$20.88 as at the close of Tuesday 01 September 2020.

IG’s client data shows that ‘buys’ comprise half of all trades on the DBS Group counter this week.

Ready to buy and sell DBS, OCBC or UOB shares?

CFDs allow you to buy and sell the shares of these three blue-chip stocks without trading the underlying assets. Start today by opening a live or demo IG account.

OCBC’s estimated 2020 dividend yield: 3.67%

Of the three banks, OCBC saw the second largest decline in interim dividends in the latest quarter.

The group proposed an interim one-time tax-exempt dividend of S$0.159 per share, which works out to be 36.4% lower than the amount of S$0.25 paid a year prior.

Under MAS’ guidelines, the maximum DPS that OCBC can declare for FY2020 would be S$0.318, against FY 2019’s total DPS of S$0.53.

This would equate to a maximum dividend yield of 3.67% for this financial year, based on 25 August’s closing share price of S$8.67.

In their latest note, DBS brokers stated that they prefer UOB over OCBC for its higher dividend yield of 3.9%, adding that they ‘remain cautious over OCBC’s larger exposure to regional small and medium enterprises in Hong Kong and Indonesia’.

Meanwhile, CIMB had called OCBC their least preferred dividend pick, citing the bank’s ‘unexpected credit costs and volatile treasury income’ as key factors.

In terms of share price outlook, the OCBC stock currently has an average 12-month price target of S$9.87 from 21 analysts polled by Bloomberg. This represents an upside of 13.8% from Tuesday 01 September 2020’s last traded price of S$8.67.

IG’s client data shows that ‘buys’ constitute a majority of trades (68%) on the OCBC counter this week.

Read more: Top 3 Singapore Dividend Stocks to Buy

UOB’s estimated 2020 dividend yield: 3.98%

UOB declared the smallest drop in interim dividend pay-out this year.

The group proposed a dividend of S$0.39 per share, down 29% from the amount of S$0.55 paid a year prior.

Under MAS’ guidelines, the maximum DPS that UOB can declare for FY2020 would be S$0.78, against FY 2019’s total DPS of S$1.30.

This would equate to a maximum dividend yield of roughly 3.98% this financial year – the highest among the three banks, based on 25 August 2020’s closing share price of S$19.62.

As mentioned above, DBS researchers prefer UOB over OCBC ‘as a more defensive’ stock pick due to its higher dividend yield, as well as higher return on equity and larger domestic exposure.

Looking further ahead, RHB analysts predict that UOB’s full-year dividend amount for FY2021 will increase to S$0.90 – assuming that there are no further MAS updates.

In terms of share price outlook, the UOB stock currently has an average 12-month target of S$21.93 from 20 analysts polled by Bloomberg. This represents an upside of 11.8% from the First of September 2020’s closing price of S$19.62 a share.

IG’s client analysis shows that ‘buys’ form most of the UOB trades (67%) this week.

How to trade Singapore banks with IG

Are you feeling bullish or bearish on DBS Group, OCBC or UOB shares?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

1. Create a live or demo IG Trading Account, or log in to your existing account
2. Enter <DBS Group Holdings Ltd>, <Oversea-Chinese Banking Corp Ltd> or <United Overseas Bank Ltd> in the search bar and select the instrument
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade