Nomura: UOB, DBS among most attractive Asia ex-Japan banks on dividends

OCBC, DBS, UOB and Citibank ATMs at Tang Plaza in Singapore; taken September 2018.OCBC, DBS, UOB and Citibank ATMs at Tang Plaza in Singapore; taken September 2018.

Nomura tipped UOB and DBS as the most attractive among Asia ex-Japan developed market banks on dividend yields.

“UOB/DBS are becoming Asia ex-Japan’s dividend yielding behemoths, averaging around 5 percent; stable dividend policy adds its attractiveness as these banks’ dividend volatility is the lowest of the Asia ex-Japan banks,” Nomura said in a note on Wednesday.

It noted that on Tuesday’s closing price, the two Singapore banks’ forward dividend yields were within the top five of Asia ex-Japan developed market banks and Southeast Asian banks.

Nomura said the median dividend yield for Asia ex-Japan developed market banks was 3.8 percent, while it was at 3.6 percent for Southeast Asian banks.

“On top of their excellent record of showing a sustainable dividend pay-out, the Singapore banks’ overcapitalized balance sheets enable UOB/DBS to increase dividends,” Nomura added. “We expect UOB/DBS to continue growing their dividends at a faster pace relative to the last 10 years.”

It raised its forecast for UOB’s dividend to S$1.40 a share, comprising a core dividend of S$1.00 and a special dividend of S$0.40, and a 59 percent dividend payout ratio.

It rates UOB and DBS at Buy, with target prices of S$33.80 and S$31.50 respectively. It rates OCBC at Neutral with S$12.50 target price.

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