Asia Tea Time - #90 ☕

DBS returns capital to shareholders and investing at all-time highs

Author

Tim Phillips
February 15, 2025 • Estimated Reading Time: 7 minutes

This week I talk a focus on shareholder returns from DBS Group and why investing into markets at record highs isn’t as bad as we think.

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Macro in Asia

DBS Group reports record results and rewards shareholders

DBS Group Ltd (SGX: D05), Singapore’s largest bank, saw its share price jump to a record high on the back of strong Q4 2024 results that were announced on Monday (10 February).  

The bank announced a dividend hike and also announced plans to return extra capital to shareholders in 2025.

Why it’s happening

  • DBS reported its Q4 2024 and full-year 2024 results at the beginning of the week. Net profit for the quarter was up 11% year-on-year to S$2.52 billion but actually came in slightly below expectations.

  • While this was down from the S$3.03 billion net profit for Q3 2024, investors were happy with the full-year numbers. Its 2024 net profit reached a new record high of S$11.29 billion – up 12% from 2023, which itself was a record high when released.

  • The market was more excited by the news of extra capital returns for shareholders. DBS announced a hike to its dividend per share (DPS) from S$0.54 to S$0.60 but also pledged to return an extra S$0.15 per share per quarter to shareholders as a “capital return dividend”.

Why it matters

  • Banks in Singapore have been red hot as interest rates in the US stay elevated and profits continue to roll in. Furthermore, Singapore’s Straits Times Index (STI) hit a new high on the back of the results from DBS and its share price advanced.

  • In this world of uncertainty and lacklustre returns in the Singapore stock market, it’s encouraging for local investors that it’s biggest company is still managing to do so well.

What’s next?

  • Look out for results from the two other big banks in Singapore – UOB (SGX: U11) and OCBC (SGX: O39) – as they report their own results in the next two weeks. Investors will be keen to see if the broader trend of returning capital to shareholders is seen with them.

 

Tim’s Take

It was another solid quarter from Singapore’s biggest bank and was in line with what investors wanted to see – higher profits and dividends.

The full-year 2024 dividend per share from DBS – which hit S$2.22 – was actually up 27% year-on-year versus the dividend per share the bank paid out for 2023. This came on the back of an impressive Return on Equity (ROE) of 18% for 2024, making it one of the most profitable big banks in the developed world.

Fee income at DBS hit a record high in 2024, led by an unbelievably robust 45% year-on-year rise in wealth management fees – which hit S$2.18 billion during the full year.

What really got my attention though, is the focus on shareholder returns by DBS management. An extra S$0.15 capital return dividend was pledged for each quarter in 2025, effectively giving DBS shares today a 12-month forward dividend yield of around 6.7%.

An interesting presentation at the FSMOne Invest Expo in January 2025 that I attended expounded on this – the speaker talked about how DBS’s focus on shareholder returns was translating into a higher valuation and share price when compared to its peers.

It’s hard to argue with that thesis. Beyond looking at ROE and profits, where DBS reigns supreme versus the other two, a lack of returning capital sufficiently to shareholders at both UOB and OCBC has meant that DBS has left their shares in the dust over the past one, three, and five years.

At the end of the day, companies are rewarded by investors (and the market) by focusing on capital allocation and, in this sense, DBS continues to be top dog among the Singapore banks.

Unless the two other Singapore banks can catch up and start focusing on rewarding shareholders for their patience, that premium for DBS shares is likely to remain.  .

Tim’s Money Tip of the Week

Buying at all-time highs is scary. I get it – inevitably whenever we invest or put a whole load of capital into the market, the next day it falls.

Over the long term, though, it’s meaningless. And investing money into the global stock market when it’s at all-time highs actually won’t do much damage to your long-term returns. If anything, it’s more damaging to “wait and see” what the market does rather than invest it immediately.

Looking back at data from the US stock market – with the S&P 500 Index as the proxy – since 1950 there have been 1,250 all-time highs (up to early 2024). On average, that’s 16 all-time highs per year.

Indeed, leaving your uninvested cash (meaning cash outside emergency funds and short-term needs) out of the market can do much greater damage to your returns. That’s because it means you waiting for a correction that will come much, much later.

Of course, no one can tell but looking at the historical data is useful. If we look one year out from each all-time high in the S&P 500 Index over that period, market corrections of 10% or more occurred only 9% of the time.

Don’t let short-term headlines, impact our long-term financial goals, in other words. If we do have some hesitancy to put a chunk of money into the market all in one go at a market high, then it could make sense to split it into, say, thirds.

So, invest one-third now, another third in three months and the final third in six months. By spacing out, much like a dollar-cost average (DCA) approach, we can take that psychological element out of investing. And that’s priceless.