Lower dividend payouts this year?

PUBLIC-listed companies (PLCs) may pay out less dividends this year due to global uncertainties, analysts say.

The implications of the European debt crisis, state of the US economy and continued uprising in Arab states do nothing more than to contribute to the global economic uncertainties.

Most analysts agree that there will be dividend payout cuts this year due to the current state of affairs.

"I expect companies to give slightly less dividend payouts this year in order to pile up their war chest during these times of uncertainty," M&A Securities Sdn Bhd deputy head of research Ahmad Saifuddin Morat told Business Times.

Meanwhile, Mercury Securities head of research Edmund Tham said that due to the current economic outlook, consumer spending will most likely fall, thus affecting PLCs' cash flow.

"Consumers are getting cautious," he said.

On sectors likely to give out less dividends, Ahmad Saifuddin expects the banking sector to be among them this year. The figures, however, will still be higher than the other sectors'.

There are many reasons why some PLCs may cut dividends. These include preserving cash for the next fire sale purchase, developing new products, mergers and acquisitions, or simply because the companies are struggling with declining earnings.

"If a company is stable, it will be able to give good dividend. But if it is expanding, for example, it may cut its dividend to save cash," said Tham.

Meanwhile, OSK Research head of research Chris Eng thinks otherwise.

He expects most PLCs to increase their dividend payouts, especially companies that are able to maintain their dividend yields.

"Things are not that bad yet that these companies have to cut their dividends ... there is no drop in corporate earnings yet," he said.

However, he said it depends on various factors such as the companies' cash flow, growth prospects and future plans.

Chris predicts the telecoms and consumer sectors to give higher dividends and Ahmad Saifuddin expects the plantation sector to do the same.

Dividend payouts are companies' way of sharing profits with shareholders. Some companies have high dividend payouts because they have extra cash to pass along.

Meanwhile, some companies have low or no dividend payouts because they don't have extra cash or need to keep all the cash they can in order to grow the business.