Payout Ratio for Banks - Dividend Machines by The Fifth Person

Q&A › Category: Dividend Stocks › Payout Ratio for Banks

Vivienne asked 11 months ago

Hello Rusmin, I was just reading your "Dividend Kings" report, and notice that the banks have a significantly lower payout ratio compared to the other "kings" you've featured: Netlink has 108%, for instance. DBS: 45.2% UOB: 49.3% OCBC: 49.5%

Why is that? Has it got to do with hoarding reserves?

Separately, Netlink has a more-than-100% payout ratio. I reviewed Victor's notes cautioning payout of more than 100%, what do we make of this number then?

Thank you! Bon weekend!

best,
vivienne

1 Answers

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Rusmin Ang Staff answered 11 months ago

Hi Vivienne, Yes, bank generally conserve more cash as part of capital adequacy requirement. Local banks are a lot more conservative, that's why they are retaining more cash to conserve for downturn. For Netlink Trust, it is a trust and a bulk of their expense is actually non cash depreciation item. So it is better to look at free cash flow and they no longer need to spend a lot of heavy capex which allows them to payout almost everything.

Vivienne replied 11 months ago

Thank you, Rusmin!