Triple down on DBS

A month ago, I was attracted to DBS’s latest declaration of dividend and bonus shares that I bought some shares without much due diligence.

After doing a bit of homework, I am convinced that they are likely to sustain their dividend for at least the next two years. And even if they don’t, I will be contented with the lower yield. As such, I tripled my initial position.

I am glad that they have transcripts for both the media briefing and analyst call on their investor websites, as I read better than listen. I put the link at the end of the post. Do read them, so that you roughly know how they arrived at their guidance.

Besides reading the transcripts, I also compiled the past few years data to see if I can glimpse anything from the numbers.

Similarly to what I have written in my previous post on OCBC, net profit is depending on net interest income (NII), non-interest income, and even allowance. Also, while NII is affected by NIM, the size of the loan book matters too. We can see from the numbers above, there were two recent occasions when lower NIM did not result in lower NII (2020 vs 2018, 2022 vs 2018, 2019).

I am also impressed by the growth of their non-interest income. From 2018 to 2023, it compounded 9% annually. With the current momentum and contribution from Citi Taiwan, that should continue to grow this year.

For FY2022, on top of $1.50 dividend, there was a special dividend of $0.50.

If their guidance is right, then next year dividend would be $2.16 and $2.40 in FY2025. My average price over the two transactions (including fees) is around $33.17, and after bonus share, that will be about $30.15. Hence, I will be getting a yield of 7% for 2024 and 8% yield for 2025! How not to like that?

What could go wrong?

The (business) world is uncertain, so things might not turn out as expected. The drop in NIM might be sharper, non-interest income might not grow, higher allowance might be required, the group might need to retain more cash for growth.

I do think that this year’s guidance won’t be off by too much, so let’s assume $2.16 dividend for FY2024. Let say, for any of the above (or combination of) reasons, dividend dropped by 30% to $1.50 in the future. Base on my average price, that is still a pretty decent 5% yield.

But but…price will drop if dividend dropped to that level? And there will be capital loss!

Well, my main objective for investing in DBS is for income, so the price movement doesn’t really matter to me. That is, if there isn’t much change in the underlying fundamentals, ie, the drop is due to business cycle and not permanent.

Also, if the drop is simply due to the lower NIM because of lower rate, then yield from SSB and T-bills are likely to drop too. Hence, a 5% yield would be attractive then, which means the price might not drop much too.

What if things turn out to be even worse?

That would be a question for each of my investment. I manage the risk with my position size. Even with the latest buy, DBS only occupies 4% of my equities portfolio. Including OCBC and UOB, my exposure to Singapore banks is about 18%.

With this purchase, I am done with buying of DBS for the moment. Any further purchase will only be after they go XB. That is if I still want to buy more.

DBS Quarterly Financials


These are the referral links for the services and platforms I used. If you would like to use any of them, do sign up my referral links.

Trust Bank (code: 1X9DDP1V, additional $10 Fairprice voucher)
Keppel Electric
FSMOne (code: P0003528)
StocksCafe (code: TFI)

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