EPF dividend for 2016 to reflect market conditions

KUALA LUMPUR: The Employees Provident Fund ( EPF) is expected to announce its full-year dividend for 2016 this weekend.

For 2015, the pension fund declared a dividend of 6.4 per cent which amounted to a total payout of RM38.24 billion.

For 2016, the dividends will surely reflect the weak sentiment in the domestic and foreign equities markets.

Almost every pension and investment fund suffered from the adverse effects of the steep fall in crude oil prices to historical lows of US$ 28 ( US$ 1 = RM4.44) per barrel in January, the marked depreciation of the ringgit and ‘British exit’ referendum woes.

EPF was not spared as it was a major investor in Bursa Malaysia with a significant weightage in banking, plantation and oil & gas stocks, which suffered severe losses.

The EPF can be expected to declare a dividend rate of close to six per cent despite these challenges.

Market analysts said this would be a decent return to the contributors.

The fund’s foresight in pursuing diversified portfolio investments that included foreign assets put it in good stead to reap decent returns like last year despite the odds.

Analysts say EPF’s dividend would be relatively better than other domestic funds, driven by its foreign assets which, although constitute 28-29 per cent of its investment portfolio, would account for 39- 40 per cent of the income.

In short, overseas investments continued to enhance returns.

When one looks at funds worldwide, getting yields is basically a major challenge amid a low growth and low interest rate environment.

Nevertheless, in terms of consistent short- and long-term returns, analysts say very few actually beat EPF because it didn’t have a negative year.

While the first quarter of 2016 was a pretty difficult period for equities, the economy started to turn around in the second half and consequently, third- quarter financial results for EPF picked up.

The fourth- quarter results would be announced at a press conference on Monday along with the full-year results after the dividend announcement over the weekend.

Ironically, while it was an alarming last quarter given that then President- elect Donald Trump’s penchant for controversial statements, the US markets actually rose which helped boost EPF’s global operations and income.

Attractive equity markets where EPF reaped stable returns through investments in property development and infrastructure stocks include the US, UK and Europe.

EPF’s gross income for 2016 would be higher than in 2015, according to analysts, but because Bursa Malaysia took a beating last year, EPF raised its provisions for equities in Malaysia.

Understandably, contributors have to accept that declining dividends would be the ‘ new normal’ given the conditions last year.

Contributors still have the trust in EPF which, besides a high level of service, has always exercised prudence in its investment with secure assets a core ingredient of its overall portfolio.

A customer satisfaction survey conducted a few years ago showed that 94.74 per cent of EPF’s customers were satisfied with its services.

As such, whatever the dividend announced by EPF this weekend would be one that is realistic based on market conditions and takes into account the interests of its contributors. — Bernama