The Employees Provident Fund (EPF) expects to declare a dividend of 5.2% to 6.0% in 2021, on the back of rising gross investment and improving capital market performance, the economists said.

Commentary by Economist Mohd Afzanizam Abdul Rashid

Mohd Afzanizam Abdul Rashid, chief economist of Malaysia’s Islamic Bank BHD, said the dividend could be between 5.20% and 5.40% in 2021.

Mohd Afzanizam Abdul Rashid also said that in 2020, pension fund managers declared a dividend of 5.2%. Traditional savings of RM42.88 billion and Sharia savings of 4.9% for a total dividend of RM4.76 billion. If earnings improve in the fourth quarter, the odds of a dividend yield increase in 2021 are higher.

In addition, the emergency fund has diversified its portfolio into overseas markets, where earnings from foreign equities account for a large proportion of total earnings.

“So their portfolio diversification strategy is really paying off and can translate into sustainable dividend yields going forward,” he added.

Views on I-Sinar, I-Lestari and I-Citra

The market has reacted with concern to the EPF’s special withdrawals of I-Sinar, I-Lestari and I-Citra. However, the economist believes the withdrawals will probably not have a significant impact on dividend performance.

He pointed to positive economic growth in 2021. A fall in the unemployment rate from a high of 5.3% in mid-2020 to 4.2% in December 2021.

He said, therefore, that new contributions from EPF members, as well as maturing investment assets, would help offset the withdrawal trend.

Views on Datuk Shazali Abu Mansor

In view of the better investment performance, the dividend yield of the Emergency Fund will be between 5.5% and 6.0%.

“Dividends should rise with income. Growth in 2021 should be above 5.2%, and anything below that is not reasonable.”

Views on Anthony Dass

Anthony Dass, chief economist and head of research at Ambank Group, also said he expects the payout ratio to hover between 5.45% and 6.0%.

“With the economy recovering, more people will be employed. At the same time, new businesses rebuilding emergency fund savings will create more jobs,” he said.

“However, whether savings levels reach 2019 levels will depend on how much they can contribute to the EPF in the future.”

With a view of 2022, the rising interest rate environment will help EPF’s revenues in fixed income and money market instruments. As new bond issues will link to higher interest rates, which means higher coupon rates.

“Perhaps THE EPF’s strategic asset allocation (SAA) will help steer the fund through these turbulent times,” he said.

Conclusion

Overall, the three economists agreed on Malaysia’s economic situation that the 2021 dividend forecast will be between 5.2% and 6.0%. If less than 5.2% is highly unreasonable.

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(Source: The Star)