In her view, the strong dividend support is one possible key driver that may have driven DBS’s share price gains in the last one month.
DBS, on Feb 7, announced its FY2023 ended Dec 31, 2023 results, along with a 1-for-10 bonus issue and a final dividend per share (DPS) of 54 cents for the 4QFY2023. The move brings the bank’s FY2023 dividend payout to $1.92, 42 cents higher or 28% up from FY2022’s total DPS of $1.50, excluding special dividends.
For FY2024, management is guiding for a DPS of $2.16 or 54 cents per quarter.
The dividend will also be distributed to the new shares issued under the bonus issue.
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“This means that for every 1,000 shares held before the ex-bonus date, an investor will receive 100 additional shares as well as $216 in additional dividends for the FY2024 dividend payout. This brings the total dividend payout to $2,376 per 1,100 shares held (versus $1,900 for every 1,000 shares held before the bonus issue),” Lee illustrates.
Investors will need to hold shares in DBS by the ex-dividend date of April 5. The dividends will be paid on April 19 while the ex-bonus date is on April 22.
“Based on [the] current cum-share price of $34.98 and FY2024 projected DPS of $2.376, the estimated dividend yield is 6.8%. This is sharply higher than the average estimated dividend yield of 5.6% for the Straits Times Index (STI) for FY2024 and significantly higher than the STI’s average 10-year dividend yield of 3.9%,” says Lee.
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The attractive dividend yield of 6% will provide strong share price support, she adds.
In FY2023, DBS delivered record profits and its highest return on equity (ROE) of 18%.
Aside from the strong net interest income (NII), DBS also benefitted from the consolidation of Citi Taiwan, which it completed in August 2023.
“This also led to higher credit card income from higher card spending and a wider customers base,” Lee notes.
Thanks to the consolidation, DBS’s assets under management (AUM) increased by 23% y-o-y to $365 billion from $297 billion in FY2022. Its wealth management income also expanded by 33% y-o-y to $4.4 billion in FY2023, up from FY2022’s $3.3 billion.
“With the enlarged portfolio of assets under its management, up 23% year-on-year in FY2023, this should provide a healthy base for the group to uncover more opportunities to grow its fee and wealth income via the cross-selling of products and services,” says Lee.
“Growth in fee income should provide growth to help mitigate the impact from a softening interest rate environment. For the latter, management is guiding for NII to be around the FY2023 level. Management has earlier guided for net interest margin (NIM) to be slightly below the 2023 exit-NIM of 2.13%,” she adds.
As at 11.25am, shares in DBS are trading 6 cents lower or 0.17% down at $34.92.
