More companies raising dividend

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By YEOW POOI LING (Source : The Star 12 April 2007)
PETALING JAYA: High dividend yield stocks will provide support amid lingering concerns of market correction or weakening in the US economy.
OSK Investment Bank head of research Kenny Yee said dividend stocks helped “mitigate volatility in the portfolio” as they were more stable in terms of share price movement.
He noted that more and more companies were raising their dividend to reward shareholders.
“Companies realise that paying good dividends helps boost the share price as well as increase efficiency in capital management,” he said, adding that it also improved return on equity.
For example, Public Bank Bhd declared a total dividend of 60 sen per share for the year ended Dec 31, 2006. Since the dividend’s ex-date on March 16, the share price has appreciated 5.7% to RM9.20 yesterday, giving a total return of RM1.10 per share or total shareholders’ return of 12.6%.
Meanwhile, MIMB Investment Bank head of research Pong Teng Siew said during a market rally, investors tended to look for capital gain, hence stocks with attractive dividend yield only attracted “a certain type of investors.”

He said taking a defensive approach during a bull run might result in the loss of opportunity to make capital gains due to the low volatility of high dividend yielding stocks.
“Usually in a bull run like now, investors buy for capital gain and not for stable income because they do not want to risk under-performing the market,” Pong added.
Companies that had a stable recurring income would be able to sustain paying out high dividends, he said, citing examples like Chemical Co of Malaysia Bhd, Bintulu Port Holdings Bhd and Highlands & Lowlands Bhd.