Malaysian companies slash dividends by nearly a third in 1Q20

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KUALA LUMPUR (July 24): Based on Bursa Malaysia filings, the large caps - companies with market capitalisation of at least RM2 billion - had slashed their aggregate dividends payment by 31% to RM3.39 billion for the first quarter this year (1Q20) compared with RM4.91 billion in 1Q19.

An analysis that included the top 100 companies showed that shareholders have seen a net reduction of RM1.52 billion in dividends for 1Q20. Dividends slashed amounted to RM1.7 billion while higher dividend payouts amounted to only RM179.87 million.

The total tally of dividend-paying companies in the first quarter fell to 31 compared with 37 a year ago.

Other than glove maker Top Glove Corp Bhd, which has tripled its total dividend outlay to RM262.4 million from RM89.6 million last year, and Hartalega Holdings Bhd, which has upped its dividend payment by about 8% to RM69.4 million, the rest of the large-cap companies have either reported flat or declining dividends.

Six companies have suspended dividends to conserve cash this year. They include Hong Leong Financial Group Bhd, Alliance Bank Malaysia Bhd, Gamuda Bhd, Carlsberg Brewery Bhd, Sunway Real Estate Investment Bhd and VS Industry Bhd.

Year to date (YTD), the share prices of these six companies are currently down 9% to 17%.

Companies that slashed their dividend payments substantially include Petronas Dagangan Bhd, which cut its dividends by 66% to RM49.67 million from RM149 million in 1Q19, followed by AMMB Holdings Bhd, which pared its dividend payout by 51% to RM219.52 million from RM451.38 million.

Meanwhile, Astro Malaysia Holdings Bhd and IJM Corp Bhd, have both cut their dividends by half from RM104.28 million and RM72.59 million last year, to RM52.14 million and RM36.29 million respectively. YTD, these four stocks are all down between 6% and 37%.

Going forward, the outlook for dividends appears dim, as Bloomberg consensus estimates are now projecting an 18% annual drop in dividends for KLCI component stocks next year.

Commenting on the current dividend landscape, market analysts have unanimously agreed that uncertainties caused by the COVID-19 pandemic have led to downbeat forward expectations on earnings prompting companies to turn conservative by preserving cash.

MIDF Head of Research Imran Yusof said: “Corporates may be looking at preserving cash due to the uncertain economic conditions as we believe the full impact of the COVID-19 pandemic has yet to fully manifest.

“Hence, corporates may look to cut dividend payments to strengthen their cash position to weather current headwinds. We do not foresee dividends this year to be comparable to previous years due to these reasons,” he said.

Victor Wan, head of research of Inter-Pacific Securities Sdn Bhd concurred.

“The situation is still very fluid, most companies do not know the actual impact still, let alone on giving guidance. It is fair [for corporates] to turn conservative at this juncture,” he said.

Analysts pointed out that the more conservative dividend stance was seen across sectors, and is more prevailing on real estate investment trusts, tourism and banking industries.

Nevertheless, Imran said corporates that have more defensive qualities in their earnings may maintain their dividend levels.  As such he said, “Investors [can] look for corporates that are in defensive sectors or defensive earnings such as Tenaga, Pharmaniaga and UEM Edgenta, to name a few.”