TNB’s high dividend policy augurs well for economy

The Tenaga Nasional Berhad (TNB) logo is seen on a building in Kuala Lumpur April 29, 2016. — Picture by Saw Siow Feng
The Tenaga Nasional Berhad (TNB) logo is seen on a building in Kuala Lumpur April 29, 2016. — Picture by Saw Siow Feng

KUALA LUMPUR, Dec 7 – High dividend payout by large-capitalised stocks like Tenaga Nasional Bhd (TNB) augurs well for the economy as it spurs consumer spending and boost investor sentiment, said analysts.

Billions will flow into the system as direct shareholders and account holders of institutional funds with holdings in the company’s shares stood to gain with more money in their pockets, said Sunway University’s Business School Economics, Professor Dr Yeah Kim Leng.

“The higher income from the dividend would help further lift disposable income. This may support the consumption growth, which rose by around seven per cent in the third quarter of this year,” he told Bernama.

On TNB’s record dividend payout, Yeah said, it would in turn help sustain consumer spending in 2018.

TNB announced a payout of RM3.5 billion for financial year ended Aug 31, 2017.

Its board of directors decided to increase the current dividend payout range to 30-60 per cent from the previous 30-50 per cent.

For the record, as of August 2017, the Employees Provident Fund (EPF) has 11.70 per cent stake in TNB, Permodalan Nasional Bhd (PNB) (11.08 per cent), Retirement Fund Inc (KWAP) (5.49 per cent) Tabung Haji (1.83 per cent) and Lembaga Tabung Angkatan Tentera (0.15 per cent).

An analyst, who requested anonymity, concurred.

“Although the majority of the shareholders are institutions such as EPF, PNB and KWAP and unit trust companies, the people will eventually benefit as it puts more money in the hands of shareholders or unit holders.

“It is the trickle-down effect,” he said, adding that the national electric utility's new dividend policy reflected improvement in its investment performance, in line with the stronger growth of Malaysian economy. Other analysts believed the higher dividend policy signalled optimism of the firm’s prospect going forward. Public Invest Research Equity Research Analyst, Nur Farah Syifaa’ Mohamad Fu’ad, said the higher dividend policy was anticipated by the market amid TNB's growing profit.

“We expect TNB's profit will continue to grow in line with the demand for electricity.

“With the new dividend, we are encouraged to increase our dividend payout forecast from 40 per cent to 50 per cent for financial year 2018/19,” she said.

Meanwhile, AllianceDBS Research Analyst, Quah He Wei, said: “The higher dividend payout exceeded our expectation.”

He said TNB’s revision to its dividend policy illustrated the strong confidence it has with its earnings visibility given the smooth implementation of imbalance cost pass-through mechanism.

Affin Hwang Investment Bank Vice-President/Head of Retail Research, Datuk Dr Nazri Khan Adam Khan, said the new dividend policy also sent a strong signal to the investors about the stability of TNB shares as it indicated the utility company’s business prospect ahead.

“TNB shares on Bursa Malaysia are on upward momentum since it announced the new dividend policy and I hope this would be sustained for the long term ahead,” he said.

Companies like TNB also heightened the local bourse's reputation as a defensive market, he said.

TNB’s share prices have been trending upwards over the past one year from a low of RM13 to RM15.62 at the close yesterday, valuing it with a whopping market capitalisation of RM88.50 billion. — Bernama

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