For years, cheerleaders of the sideways-swaying Straits Times Index (STI) would valiantly say that although Singapore stocks do not provide much capital appreciation, they offer better than average yields. And therefore, when total returns are measured, Singapore stocks, while boring, are not that shabby.
Over the past couple of years, buoyed by higher interest income, the three banks began boosting returns not just through share price gains but also through higher dividends. Thanks to the efforts of other large caps who were inspired to follow suit, the STI has reached new highs. The market’s already cheery mood received a further lift after the latest reporting season, when various blue chips declared or dangled the prospect of higher dividends.
For the companies that have been doing well, the higher payouts are expected. However, what is surprising is that there were those with doses of bad news who also had improved dividend payouts.
Let’s start with the obvious ones. DBS Group Holdings, which has time and again pleased investors with both appreciating share prices and higher dividends now at 75 cents per share per quarter, guided in its 3QFY2025 ended Sept 30 business update, for dividends in FY2026 will be increased to 81 cents per quarter, sending its share price to a record high of $55.55.
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Singapore Telecommunications (Singtel), thanks largely to proceeds from the sale of additional shares in associate Bharti Airtel, plans to pay an interim dividend of 8.2 cents in 1HFY2026 ended Sept 30, up from the 7 cents paid in 1HFY2025. To tie its active capital management to shareholders’ returns, Singtel had articulated a formula where proceeds from the medium-term divestment target of $9 billion will be returned as special dividends after deducting capex. Hefty investments in new growth areas such as data centres are expected to generate new earnings streams in time to come.
Keppel used to be an industrial-age conglomerate saddled with a valuation discount. It is now increasingly recognised as a modern asset operator and manager deserving a higher valuation. After more than a decade, Its share price finally crossed the $10 mark late last month and has stayed there since. At its 3QFY2025 ended Sept 30 business update, the company tantalised prospects of a “steady and sustainable” dividend strategy that reflects the earnings of the “New Keppel”, where the operating model is more obsessed with fees and assets under management and where asset monetisation is almost a religion.
This promise of active capital management prompted analysts such as Adrian Loh of UOB Kay Hian to make a “prudent” assumption that 25% of the $2.35 billion in divestments announced year to date will be paid out as dividends of 32 cents per share. If so, this will bring Keppel’s FY2025 payout to 47 cents, including 15 cents already paid for the interim. In FY2024, Keppel paid out 34 cents.
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Special dividends, impairments
The trend of higher dividend payouts has applied even in other companies with an obvious blotch. Singapore Technologies (ST Engineering), the best-performing STI stock this year, reported another quarter of steady revenue growth in its 3QFY2025 ended Sept 30 business update, with new orders across its major business segments supporting further growth ahead. However, the company had to take an impairment of $667 million for iDirect, its satellite communications business, which has struggled for years to turn around. The hit will be booked when the company reports its full-year numbers.
Since FY2022, ST Engineering has faithfully paid a quarterly dividend of 4 cents, with extra bit more in FY2024’s final quarter, bringing the total payout to 17 cents. For the first three quarters of FY2025, it declared dividends of 4 cents each. However, at the 3QFY2025 business update, ST Engineering announced it will pay a final 4QFY2025 dividend of 6 cents, plus a special dividend of 5 cents. This will bring its total FY2025 payout to 23 cents per share, up from FY2024’s 17 cents.
Somewhat similarly, Singapore Airlines’ (SIA) 1HFY2026 earnings ended Sept 30 were down 67.8% y-o-y to $239 million, no thanks to the share of losses incurred by its associate Air India. Yet, Singapore’s flag carrier has proposed a capital return plan comprising a special dividend of 10 cents per share, payable annually over three financial years. As part of this package, SIA will pay out an interim dividend of 3 cents per share on Dec 23. Including its interim dividend of 5 cents per share for 1HFY2026, SIA shareholders will receive a total of 8 cents, down from the 10 cents paid in 1HFY2025.
Sats, having first waded through the pandemic and then spent the last couple of years digesting the transformational acquisition of WFS, has also declared an interim dividend of 2 cents for 1HFY2026 ended Sept 30, an improvement from 1.5 cents a year ago.
Revenue taps
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Besides paying higher dividends, these companies share several traits. As a whole, their share prices have outperformed the market, and they are all component stocks of the STI. The most obvious common trait is that their common controlling shareholder is Temasek Holdings. This means the largest beneficiary of the higher payouts is not merely yield-hunting minorities and retail shareholders.
Besides long-term stewardship of Singapore’s assets, Temasek, together with GIC and the Monetary Authority of Singapore, is to contribute an increasing amount to the nation’s Budget under the Net Investment Returns Contribution (NIRC) framework. In the Budget for the year ending March 2026, NIRC, estimated at around $27.1 billion, is equivalent to about a-fifth of the government’s planned spending. This amount was an increase of 12.9% over the previous year. Presumably, as longer-term spending is set to increase because of social needs, the funds flowing from the various revenue taps are to as well.
Unlike investors who can cash in by selling down substantial stakes, Temasek hardly makes any significant trades in its publicly listed Singapore portfolio companies. While market values can go up, they can only report paper gains. The cleaner way to extract value is to tap the portfolio companies for more dividends, especially since more than half its portfolio is made up of non-Singapore assets that face issues such as a weakening US dollar, which pulls down returns in Singdollar terms.
In recent months, various financial institutions have made bold predictions that the Singapore market will hit lofty new highs. JP Morgan’s bull case, laid out in September, is for the STI to hit 6,000 points in a year, while DBS tried to go one-up, predicting 10,000 points by 2040.
To hit this mythical-for-now 10,000 mark, assuming DBS remains the component stock with the heaviest weightage, its share price would have to double to $100 or so. Besides growing earnings and finding new growth stories, paying a higher dividend and promising to do so again can push share prices higher.
The old song sheet is that Temasek portfolio companies are run by their own boards, and that Big T takes a back seat. However, market watchers have observed a distinct shift. Tan Kuan Ern, co-head, Asia country coverage, global banking at UBS, remarks that Temasek has become more hands-on in managing its portfolio companies. Various Temasek portfolio companies, such as Sats, Keppel and Sembcorp Industries, have been making bolder moves, whether through investing in new growth or undertaking M&As. CapitaLand Investment, which has been trudging along at 12 cents per year, is reportedly in talks to merge with Mapletree Investment, also owned by Temasek. “If you are a Temasek-linked company and not looking for growth from M&A, there’s pressure from shareholders to do some assessments,” says Tan.
Seen in the context of the wide-ranging, top-level market rejuvenation measures, it is not too far-fetched to imagine that Temasek is doing its part by unscrewing the dividend taps of its portfolio companies a few more rounds so that higher returns can be enjoyed by all.
