In Singapore, investors love their dividends when they invest. And no sector represents “dividends” better than the big Singapore banks.
The biggest out of the lot is, of course, DBS Group Holdings Ltd (SGX: D05).
The bank recently held an Investor Day (on 22 May), where management outlined its medium- and long-term goals for the business.
So, for Singapore investors who love their dividends (and bank stocks), here are three key things you should know about from the DBS Investor Day 2023.
1. Dividend growth of 24 Singapore cents
DBS is known for paying out sweet dividends to shareholders.
Management aimed to keep up this record by saying it would aim to increase its dividend per share (DPS) by 24 Singapore cents per year in the medium term.
Based off its full-year FY2022 DPS of S$1.68, a 24-cent increase means the FY2023 dividend will be S$1.92 per share.
That represents nearly 15% year-on-year growth of its dividend, which is an attractive dividend growth rate in this inflationary environment.
At its current share price of around S$30.60, that means investors will receive a dividend that yields 6.3% based on its FY2023 dividend payout.
2. DBS digital ecosystem
According to management, a lot of DBS’s recent success comes down to its digital capabilities.
DBS has managed to scale in growth markets by leveraging its digital ecosystem that focuses on customer acquisition and engagement.
Furthermore, its Artificial Intelligence (yes, even banks are using it!) and machine learning-led credit origination have resulted in better portfolio management standards.
Indeed, I was surprised to learn that – from 2015 to 2022 – DBS was the world’s fourth best-performing bank stock out of the world’s largest 100 listed banks, with an annualised total return of 16% (see below).
3. Target ROE of 15-17%
Finally, DBS management stated its ambition to achieve a medium-term Return on Equity (ROE) of between 15-17%.
That means using its capital in a smarter fashion, which it has been trying to do. For the whole of 2022, DBS’s ROE was 15%.
DBS aims to get there by focusing on, and doubling down on, what has worked for the bank so far.
That has primarily come from tapping faster growth in capital-light, high-ROE businesses like wealth management.
Focus on long-term bank goals
So, for bank investors and dividend lovers, there was a lot to like about the DBS Investor Day 2023.
Of course, bank shares have suffered in recent months as it looks like interest rates in the US are close to a peak.
A recession in the global economy could also hurt sentiment for banks.
For investors, though, that could be mitigated somewhat by the solid dividends that DBS plans to pay out over the next few years.