The last earnings season of the year is now in full swing.
REITs are set to commence reporting their latest business updates and earnings this week.
This will be followed by the local banks in early November along with other blue-chip stocks.
Income investors are watching out to see which companies may be raising their dividends.
We feature three Singapore blue-chip stocks that we feel have a reasonable chance to declare higher dividends for their latest quarter.
DBS Group (SGX: D05)
DBS needs no introduction, being Singapore’s largest bank and the first Singapore stock to cross S$100 billion in market capitalisation.
The lender provides a comprehensive range of banking and investment services to both individuals and corporations.
DBS reported a stellar set of earnings for the first half of 2024 (1H 2024) as its business benefitted from higher interest rates.
Total income rose 11% year on year to S$11 billion on the back of a 6% year-on-year increase in net interest income to S$7.4 billion.
Profit before allowances increased by 10% year on year to S$6.8 billion.
Net profit also increased by 10% year on year to a record high of S$5.7 billion.
The group’s net interest margin for 1H 2024 has stayed constant at 2.14% compared to a year ago.
It was also just slightly lower than the second quarter of 2023’s 2.16%.
In line with the good results, DBS declared a quarterly interim dividend of S$0.54.
This dividend was nearly 23% higher than the S$0.44 paid out a year ago.
CEO Piyush Gupta is confident that the bank can report net profit growth of mid to high single-digits year on year.
He also reiterated that DBS has built in resilience against the risks of an economic slowdown and falling interest rates.
For every 0.01 percentage point decrease in the US Federal Funds rate, DBS will see its net interest income fall by S$4 million, down from a range of between S$18 million to S$20 million back in 2021.
If the bank can continue to grow its net profit and can maintain its quarterly dividend of S$0.54, this will represent a 23% year-on-year increase over the dividend paid out for the third quarter of 2023.
Singtel (SGX: Z74)
Singtel is Singapore’s largest telecommunication company (telco) that provides mobile, pay TV and broadband services while also owning data centres and providing cybersecurity services.
The telco introduced an additional permanent dividend component in addition to its core dividend for its fiscal 2024 (FY2024) ending 31 March 2024.
Its core dividend is set at between 70% and 90% of its underlying net profit but the group has added in a new programmatic value realisation dividend (VRD) of S$0.03 to S$0.06 annually.
This VRD will be funded from excess capital arising from a recycling pipeline of around S$6 billion.
Management has reiterated that the VRD is not one-off and will be embedded into Singtel’s dividend policy.
Because of this VRD, FY2024’s total dividend came up to S$0.15, 52% higher than the S$0.099 paid out in FY2023.
There is a high chance that the telco can pay out an overall higher dividend for the first half of fiscal 2025 (1H FY2025) if the VRD is included, and if it can maintain its core net profit growth.
For the first quarter of fiscal 2025, Singtel saw its underlying net profit grow 5.4% year on year to S$603 million.
During Singtel’s Investor Day, the group announced its ST28 long-term strategy for 2028 and expects operating profit growth to be in the high single to low double-digit quantum.
Should net profit continue its climb and the telco can successfully complete its capital recycling, there is definitely room for dividends to head higher.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, is a retail REIT with a portfolio of nine suburban retail malls with assets under management of S$7.1 billion.
The REIT will be announcing its fiscal 2024 (FY2024) earnings for the fiscal year ending 30 September 2024 on 25 October.
FCT announced a slightly lower distribution per unit (DPU) for the first half of fiscal 2024 (1H FY2024) because of higher interest expenses and the absence of contributions from Changi City Point which was divested in October 2023.
For 1H FY2024, gross revenue fell by 7.2% year on year to S$172.2 million while net property income slipped 8.4% year on year to S$124.6 million.
DPU, however, dipped by just 1.8% year on year to S$0.06022.
There’s optimism that the REIT can maintain its DPU as there are no further divestments for 2H FY2024, thereby rendering the year-on-year comparisons constant.
Also, the DPU for 2H FY2023 came in at S$0.0602, so if FCT manages to maintain its 1H FY2024 DPU, it would come in slightly higher year on year for 2H FY2024 compared with the prior year.
There’s more good news too as its Tampines 1 Mall asset enhancement initiative achieved 100% committed occupancy.
FCT’s retail portfolio committed occupancy also remained high at 99.7%.
In addition to the above, the REIT recorded positive rental reversion of 7.5% for 1H FY2024, providing investors with optimism that FCT can enjoy organic rental growth that will boost its rental income for 2H FY2024.
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Disclosure: Royston Yang owns shares of DBS Group.
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