Singapore Inc's drive to cut costs, consolidate businesses and improve investment discipline should keep payouts flowing to shareholders and push stocks to peaks not seen since the bull run of 2000, analysts say.
Corporate Singapore, which is dominated by large listed companies with big government shareholdings, has had an average dividend yield, including special dividends, of over 4 percent this year, according to J.P. Morgan Securities.
This is better than the 1.6 percent return on a typical one-year Singapore dollar deposit or the 1.5 percent a one-year government's Treasury bill would earn.
Brokers Salmon Smith Barney said high payouts from corporate Singapore should continue well into 2005 when most analysts expect equities to start to under-perform.
"In a bull market, dividends are perceived to be the icing on the cake. In a bear market, dividends are the cake," said Markus Rosgen, Salmon Smith Barney's regional strategist in Hong Kong.
Major firms in the telecoms, media, transport and banking sectors in Singapore have announced asset sales, share buy-backs and a retreat from non-core businesses over the past nine months leading to the high payouts.
A recent push towards outsourcing and lay-offs meant the trend of paying healthy dividends was here to stay.
It's a long way from the pre-Asian Crisis era when many Singapore companies simply sat on mountains of cash or invested them in non-core and in some cases loss-making ventures.
"We have got the highest dividends from Singapore and Hong Kong in recent quarters," said Eric Poh, fund manager at Societe Generale Asset Management in Singapore that manages $100 billion in assets world-wide.
Poh also said a higher dividend yield would probably be more sustainable in Singapore than anywhere else in Asia.
Poh said he expected good payouts to continue from companies such as Singapore Exchange Ltd, Singapore Press Holdings Ltd, ComfortDelgro Ltd and MobileOne Ltd.
The high dividend payouts led J.P. Morgan recently to raise its 1-year target for benchmark Straits Times Index to 2,300 points, or up 14 percent from an earlier target of 2,011. "Share price drivers into 2005 will likely be continued corporate and capital restructuring," said Christopher Gee, head of J.P. Morgan's equity strategy in Singapore.
Gee said over the past three years, large listed corporates have returned over S$8 billion ($5 billion) of capital by way of capital reductions and large one-off special dividends.
The index broke through the psychological 2,000-point barrier on September 15 to set a 45-month high. It has risen about 13 percent so far this year, beating regional benchmarks such as MSCI AsiaPacific ex-Japan Index that has risen about 2.8 percent in the same period.
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