KUALA LUMPUR (June 26): As the stock market languishes with low volume while investor attention turns to the upcoming state elections and the potential impact of their outcome, Mercury Securities say dividend yield stocks offer an attractive opoprtunity for stable returns amid the uncertainties.

In a report released on Monday (June 26), it highlighed 40 companies predicted to maintain a dividend yield of 5% or more in fiscal year 2023, with real estate investment trusts (REITs) topping the list.

“Among the 19 listed REITs, 10 already offer a dividend yield of 5% or higher. Consumer, financial, industrial, and property sectors follow suit with their own dividend champions,” Mercury Securities’ research team said.

This is followed by the energy, plantation, transportation, and technology sectors that trail behind, each with one high-yield stock.

The financial sector, said Mercury Securities, is expected to sustain earnings and dividends amid economic recovery and rising interest rates.

“The recent selloffs by foreign investors and their shift toward cash investments have increased the dividend potential, especially among banks. The banking sector, driven by substantial profits, emerges as a compelling investment opportunity with attractive forward dividend yields,” it added.

The research outfit’s top picks from the banking sector are RHB Bank Bhd (8.0% in FY2023) and Malayan Banking Bhd (7.1% in FY2023).

Meanwhile, as consumer demand rebounds from the impact of the Covid-19 pandemic, the consumer sector emerges as another promising sector for attractive dividend yields.

“Companies like British American Tobacco (M) Bhd (7.9%) and Heineken Malaysia Bhd (5.3%), known for sin stocks, are expected to offer favourable dividends as consumer demand [recovers],” it added.

Additionally, stable car sales are anticipated to sustain profits for companies such as Bermaz Auto Bhd (10% in FY2023), MBM Resources Bhd (8.3% in FY2023), and Sime Darby Bhd (5.4% in FY2023).

"In a lackluster market with low trading volume, uncertainty prevails. However, dividend yield stocks shine as a promising avenue for investors seeking stable returns. Bursa Malaysia offers a selection of
approximately 40 stocks projected to maintain dividend yields exceeding 5% in FY2023. Among them, REITs stand out as consistent performers despite share price declines caused by rising interest rates. Meanwhile, the financial
sector and also the consumer sector, particularly banking stocks, presents an enticing opportunity with attractive dividend payouts," it added.