Overseas Chinese Banking Corporation, better known as OCBC Bank, is among the top three banks in Singapore. Over the years, this bank has maintained strong performance and high dividend yield over its top competitors, DBS and UOB. The share price has also held steady for the past five years.
The latest dividend payout is considerably reasonable. Although it’s not as high as the previous years, it’s a good return to shareholders, considering the effects of the COVID-19 pandemic.
However, the share price managed to rebound from the impact of the pandemic. The bank has used this price from the first half to determine the subsequent dividend payouts.
OCBC Bank Profile
OCBC was incorporated as a merger of three banks during the Great Depression in the 1930s. Since its establishment, it has built its global presence and is on its way to becoming the second-largest bank by assets held.
Currently, it has assets worth S$521.3 billion. The bank offers a range of banking services and solutions in consumer banking, global treasury, business banking, international banking, and investment management.
Its network of branches and offices is spread across 15 countries and territories, including Singapore, Malaysia, Indonesia, China, Hong Kong SAR, Vietnam, Brunei, Japan, Australia, UK, and the USA.
OCBC Bank Share Price – 5 -Year Report Card
For the past five years, OCBC Bank’s price share has been pretty steady, hitting an all-time high of S$13.80. However, due to the COVID-19 pandemic, the price hit a low of S$8.50. However, the share price has gone back up to the S$12 mark.
This performance is a reflection of the robust banking sector in Singapore. In addition, the bank experienced solid growth in core business sectors such as net interest income, loans, and bills receivables, fees and commission income, and total income. This growth between 2008 and 2018 has played a fundamental role in boosting revenue.
OCBC Total Dividend Yield per Share for FY 2020
|Bank||Total Dividend Yield per Share||Last traded price (2 Aug 2021)||Dividend Yield|
|OCBC||S$0.159 per share (Scrip price: S$11.93)
S$0.159 per share (Scrip price: S$7.81)
Total: S$0.318 per share
OCBC, DBS, and UOB are the biggest banks that Singaporeans are familiar with. All three banks gave a dividend payout with a yield below 3% compared to the pre-COVID yield at 4-5%.
The banks had to also cap off the FY2020 dividends per share by 60% of 2019’s payout. In addition, shareholders had the option to go for the scrip dividend scheme in place of cash.
Compared to DBS and UOB, OCBC has the lowest current trading price. The price is half that of its competitors, automatically lowering the dividends per share.
Despite these low values, OCBC has a large market cap of about S$54 billion, which is 12% of the Straits Times Index (STI). OCBC also just announced an interim dividend of S$0.25 per share for 2021, an expected increase from 2020. This is an improvement for OCBC investors.
How Much Dividends to Expect?
|Gross dividends (cents per share)||15.9||43.9||48||39||36|
The latest gross dividends payout ratio is low compared to previous years. Over the last five years, OCBC bank shareholders have been earning dividends between 30 and 50 cents per share and a dividend yield of approximately 3% to 4%. However, this has now declined to 15.9 cents and 1.31%, respectively.
Despite this yield rate, OCBC is placed 13th among all blue-chip stocks with the highest dividend yields on the market; therefore, a perfect choice if you want to earn a passive income.
The dividends were at an all high in 2019 and started declining in 2020. Based on the dividend announcement made by the company for the first half of 2021, this is a sign that the downward decline might continue.
If the next dividend for the second half is poor, it might be better to go for scrip if offered. OCBC bank has a semi-annual schedule for paying dividends to shareholders. The pay dates usually take place once in June and next later in the year, around October.
Risks Based on a 5-year Price Action
Based on this snapshot of OCBC Bank’s price action in the past five years, the share price has been generally on an upward trend except between March and November 2020. This low price was a result of the COVID-19 pandemic.
While OCBC bank is a major player in Singapore along with UOB and DBS, it was still affected by a macro-economic crisis. The 21.7% plunge from its highest share price may be too volatile for risk-averse investors.
What’s the Future for OCBC Dividends?
As an investor, it’s critical to keep in mind that despite having a relatively low share price, OCBC has a higher dividend yield. OCBC is one of Singapore’s top three banks alongside DBS and UOB. While OCBC is trading at around S$12 per share, DBS is at S$13.14, and UOB is at S$26.27.
Looking at the future, this bank will continue maintaining its market share and high trust among Singaporeans. If the bank can strengthen itself against macroeconomic changes, the stock will remain popular in the coming years.
Based on this information, we can conclude that OCBC is a suitable buy for investors with limited budgets but want a higher dividend yield. The bank remains competitive in the banking sector in Singapore.
Even though UOB and DBS have a higher share price, OCBC still offers its shareholders a better return on investment. The share price has rebounded after the pandemic, which is a sign that the dividend yield could improve in the long term.
- The OCBC share price was affected by the economic changes caused by the pandemic, which lowered the dividend payout to shareholders.
- Compared to the other top banks, UOB and DBS, this bank has a higher dividend yield. This makes it perfect for investment, especially if you are more focused on the long term.
- Despite falling to as low as S$8.50, the price is coming back up close to the pre-COVID numbers.
- The bank is experiencing robust growth in its core business areas; hence, its performance could increase over time. Therefore, you should invest in the OCBC share if you are looking to earn a passive income.
- If you already have bought stocks at OCBC, you should opt for the scrip option if the next dividend announcement of the second half of 2021 is poor.
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