DBS, OCBC or UOB: Which Bank Gives You The Greatest Dividend Yield?

The three banks have just announced their interim dividends for 2021. Here’s how much the banks gave out in dividends for FY2020 and how much you would have received by investing in each of these banks.

DBS, OCBC and UOB are the banks that locals would be familiar with, being institutions that Singaporeans bank with on a daily basis. Chances are, we’ve all kept our money in their bank accounts, swiped their credit cards, made investments and took out a loan. 

Besides real estate investment trusts (REITs), bank stocks are also the stalwart blue chip stocks that hardly fail to reward shareholders with dividends, with the main question being: how much dividends are they giving out per share? For 2020's final year dividends, the three banks have already paid out the dividends in May and June of 2021.

Here’s a look at the dividends these three big banks for FY2020 and the yield relative to their trading price. 

The total dividend yield given last year usually gives a pretty good gauge of how much investors can expect to receive in the following year. However, 2020 was hardly an ordinary year. Banks had to cap their dividends per share for FY2020 at 60% of FY2019’s dividend per share. Shareholders were also given the option to take scrip instead of cash. 

This is why all three banks gave out lower dividends with a yield of just under 3% — significantly lower than the 4-5% dividend yields they were giving pre-COVID.

For 2021, the MAS has just announced on 28 July 2021 that the 60% dividend cap will not be extended — good news for shareholders of these banks as a slightly higher dividend yield can be expected for the year. Here's what the banks have announced so far for 2021:

• DBS: Q1 interim dividend of S$0.18 per share (scrip price of S$29.54), Q2 interim dividend of S$0.33 per share
• OCBC: Interim dividend of S$0.25 per share
• UOB: Interim dividend of S$0.60 per share

Let’s take a closer look at these three banks and how you can invest in their stocks.

DBS (SGX: D05)

Leading the pack is DBS bank. For the third year in a row, DBS was named the ‘Best Bank in the World’.  

With a market cap of about S$77 billion, DBS holds the heaviest weight on the Straits Times Index (STI) — an index that tracks the performance of the top 30 companies in Singapore — at 18.2%.

Here’s an overview of the dividends shareholders would have received for FY2020.

For 2020, shareholders would have received dividends that totaled S$0.87 per share. This means that if you held 1,000 DBS shares, you’d have gotten S$870 in dividends. For comparison, the dividend per share for 2019 (a pre-COVID year without MAS restrictions) was S$1.23.

DBS also offered scrip dividends to investors in 2020, first at S$21.04 for the Q2 interim dividend and then at S$23.93 for the Q3 interim dividend — prices that look like a real steal today with DBS trading upwards of S$30 per share. 

The final scrip dividend in 2020 of S$28.77 might have seemed expensive at that time, but it's already a significant discount compared to the price DBS is trading at today.

For 2021, DBS paid out Q1 interim dividend of S$0.18 per share on 25 June 2021. Scrip dividends were also offered at a price of S$29.54. DBS has also just announced their Q2 interim dividend of S$0.33 per share — an amount that's back to pre-pandemic levels.

OCBC (SGX: O39)

OCBC’s been in the news this 2021 for the appointment of their first female CEO, Helen Wong, who took over the reins from previous CEO Samuel Tsien on April 15 2021.

Out of the three banks, OCBC is the lowest priced of the lot. In fact, its current trading price is less than half the price of DBS or UOB, making it no surprise that the dividends per share are also much lower (by actual value). However, OCBC still has a large market cap of about S$54 billion, making up 12% of the STI.

Here’s an overview of the dividends shareholders would have received for FY2020.

In 2020, shareholders would have received dividends that totaled S$0.318 per share. If you held 1,000 OCBC shares, you’d have gotten S$318 in dividends. 

The 75% of shareholders that opted for scrip at a discounted price in October 2020 are sitting happy on a massive 57% gain in share price, with shares of OCBC now trading at more than S$12.30 per share.

OCBC has just announced an interim dividend of S$0.25 per share for 2021, an expected increase compared to the dividends given out in 2020.

UOB (SGX: U11)

Last but not least, we have UOB bank. Giving the highest dividend yield in 2020 amongst the three banks, UOB shareholders would have received dividends that total S$0.78 per share. This means that for every 1,000 UOB shares you hold, you’d have gotten S$780 in dividends. 

The smallest market cap of the three banks, UOB’s market cap is close to S$44 billion, making up 10.1% of the STI. 

Here’s an overview of the dividends shareholders would have received for FY2020.

Trading closer to DBS’ stock price than to OCBC, UOB’s last traded price on 2 August 2021 was S$26.13 — more than S$6 more than the scrip price given back in October. Compared to the high scrip dividends take-up rate of OCBC, UOB's scrip take-up rate for 2020 interim dividends is just 10%.

UOB has just announced an interim dividend of S$0.60 per share for 2021, which will be paid out on 27 August 2021. There is no scrip dividend scheme this time round.

Although DBS gave out the highest dividends of S$0.87 in terms of dividend per share, UOB had the highest dividend yield amongst the three banks for 2020. It remains to be seen how much dividends the banks will be giving shareholders in 2021, given that the 60% dividend cap no longer applies.

How to invest in these bank stocks?

If you’re keen to get into the bank stocks game, whether it’s for dividends or capital gains, here are the ways for you to get started. 

1. Purchase the stock directly on the stock market

DBS, OCBC or UOB: Which one will you be banking on?

If you’ve made your choice, you can start investing in the bank stocks by purchasing the stocks directly from the stock market using your brokerage account. 

2. Start a Regular Savings Plan (RSP) 

Alternatively, you can also start a regular savings plan that allows you to make recurring investments by automatically purchasing the security each month. For example, with POEM’s Share Builders Plan, all three banks are counters that you can invest in with a minimum of $100 each month.

3. Purchase an Exchange Traded Fund (ETF) that tracks the STI

If all three banks appeal to you and you can’t come to a decision, fret not. 

You can always opt to invest in an ETF that tracks the STI, such as the Nikko AM STI ETF or the SPDR STI ETF, especially as bank stocks make up more than 40% of the STI in weightage. This could also be an option for those that are unable to afford a substantial purchase of the bank stocks — just 100 lots of DBS shares would already cost S$3,000. 

The STI includes a total of 30 companies, which means you’d be investing in stocks such as REITs and other blue-chip stocks as well, giving your investment the diversification it needs. To purchase an ETF, you can buy it directly using your brokerage account, or start an RSP that purchases the ETF each month. 

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