Ask around investors who recently bought banks – be it DBS, OCBC or UOB. Many would say that they bought Banks because it offers an attractive dividend yield of more than 5% (before dividend cap) in this low interest rate environment. Many complain that REITs, once loved by dividend investors, now offer low dividend yield, which defeats the purpose of dividend investing.
In recent months, prior to the dividend cap, banks started to increase its dividends and pay out dividends quarterly. For instance, when asked by analysts the sustainability of the dividends, DBS representative replied that so long their net profit is growing and CET-1 ratio is within the range of 12.5% -13.5%, DBS will have the ability to maintain and even increase the dividend. DBS CEO was confident of maintaining the dividend even if they assumed no profit growth. This surely attracted dividend investors to reconsider their strategy and buy banks for dividends.