Specifically, US investors are subject to a tax rate of up to 20% depending on their income bracket for dividends received from both domestic and qualified foreign corporations. Foreign investors have to pay a 30% dividend withholding tax on dividends they receive from any US-listed stocks they hold.
Share buybacks, by contrast, are more tax-efficient than dividends in countries such as the US. Shareholders only pay tax if they sell the shares. Buybacks also boost a company’s earnings per share by reducing the number of shares in issue.
However, buybacks typically require more capital than dividends and are more complex to execute. The mandate is usually renewed each year at the company’s AGM.
In recent years, shareholders of DBS Group Holdings (SGX:D05
) , Oversea-Chinese Banking Corporation (OCBC) (SGX:O39) and United Overseas Bank (UOB) (SGX:U11) have been able to enjoy capital returns from the generous dividend and share buyback programmes announced by all three banks.
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As share prices move, the banks pay out more, consistently holding their respective yields at 5% or more.
For newly-minted OCBC group CEO Tan Teck Long, paying out dividends is a better way to reward the bank’s long-term shareholder base than doing a share buyback. Tan gave his view during OCBC’s FY2025 earnings briefing on Feb 25.
“Between return of capital by share buyback versus special dividend, my preference is for special dividend,” says Tan, who began his term as CEO on Jan 1. “If you really think about our shareholding base, we have long-term shareholders. A special dividend actually rewards our shareholders more broadly.”
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“If you do a share buyback, basically, it is shareholders who return the shares back to the bank. So I think there’s a slight difference in terms of thinking. We really want to reward our long-term shareholder base.”
DBS starts the ball rolling
The push for capital returns comes after a relatively conservative period amid the Covid-19 pandemic. In 2020, the Monetary Authority of Singapore (MAS) told local banks to cap their dividends for FY2020 to 60% of what they paid out in FY2019.
The cap was a pre-emptive measure to bolster the banking system’s resilience and ability to lend during a period of heightened uncertainty. As a result, DBS, OCBC and UOB paid out dividends of 87 cents, 31.8 cents, and 78 cents, respectively, and the dividend payout ratio for all three banks ranged from 39% to 47%. The MAS’s cap was lifted a year later.
It was only after the pandemic that investors began to see the banks pick up their capital return efforts. DBS was the first to start the ball rolling when it paid a special dividend of 50 cents, resulting in a full-year dividend of $2 for FY2022. In FY2023, DBS embarked on a “one-for-10” bonus issue where investors received one bonus share for every existing 10 shares held. This effectively raised the bank’s dividend payout by 10%.
Then, in FY2024, DBS announced a suite of capital management measures. These include a $3 billion share buyback programme as well as a commitment to pay out $5 billion in capital return dividends from FY2025 to FY2027. DBS says it will pay out a 15 cent capital return dividend every quarter over that period.
For FY2025, DBS paid out a total dividend of $3.06 per share. This includes 60 cents in capital return dividends and represents a dividend payout ratio of just over 79%.
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So far, DBS has paid out about 21% of the total $8 billion in excess capital. In an earnings call on Feb 9, DBS CEO Tan Su Shan told analysts that the bank has used about $370 million out of the total $3 billion allocated for buybacks and paid out $1.3 billion out of the total $5 billion in Capital Return dividends.
Maybank’s Thilan Wickramasinghe says DBS may issue a special dividend down the line since only 12% of the $3 billion share buyback mandate has been completed so far.
“DBS reiterated its commitment to capital return until FY2027,” says Thilan in a Feb 9 note. “If not fulfilled by FY2027, we think there is potential for a special dividend, in order for DBS to keep its mandate.”
OCBC and UOB join the fray
DBS was not the only bank returning capital to its shareholders. In its FY2022 results announcement, then-OCBC CEO Helen Wong introduced a 50% dividend payout ratio. UOB has long maintained its dividend payout ratio at 50%.
Both banks went on to announce similar capital return plans as DBS. In February 2025, OCBC said it was returning $2.5 billion in capital via dividends and share buybacks over 2025 and 2026. This will result in an increased dividend payout target of 60%, with the additional 10% coming from the special dividends to be paid out. Roughly $1.5 billion will be returned in the form of dividends, while the remaining $1 billion will be used to buy back shares. OCBC says its share buyback programme will be completed by 2026.
According to OCBC’s group CFO Goh Chin Yee, the bank has used $220 million to buy back its shares and has $780 million remaining. “If we do not continue to execute our share buyback and cancellation, we will return that in the form of a dividend by FY2026,” says Goh.
For FY2025, OCBC paid out a total dividend of 99 cents per share. This includes a special dividend of 16 cents and represents a dividend payout ratio of 60%.
Citi Research’s Tan Yong Hong believes that OCBC would likely return the balance of $780 million via dividends instead of buybacks. “Despite buybacks, OCBC only cancelled 13.6 million shares on Nov 10, implying only $225 million of share buyback is completed,” says Tan in a note on Feb 25.
UOB launched a similar capital return plan in February 2025 as well. To mark the bank’s 90th anniversary, UOB said it would be distributing $3 billion in excess capital from 2025 to 2027. This involves paying out $1 billion in the form of special dividends and using the remaining $2 billion to fund share buybacks.
According to UOB’s group CFO Leong Yung Chee, the bank has already used about a third of the $2 billion it set aside for share buybacks. “In total, more than 50% of that capital return plan has been done, and we are well on track to execute on the rest of it across the next two years,” Leong told reporters at UOB’s earnings briefing on Feb 24.
For FY2025, UOB paid out a total dividend of $1.56 per share. This represents a dividend payout ratio of about 50%. UOB’s special dividend of 50 cents was paid out over two tranches in May and August 2025.
CGS International analysts Tay Wee Kuang and Lim Siew Khee say in a Feb 24 note that they expect UOB’s dividend per share for FY2026 to be $1.70, which translates to a dividend yield of 4.4%. This is assuming there are no further capital return initiatives after last year’s special dividend.
