This article first appeared in Capital, The Edge Malaysia Weekly on November 11, 2024 - November 17, 2024

DIVIDEND stocks are likely to be the preferred option for investors following Donald Trump’s comeback as the 47th president of the US and the uncertainties stemming from potential policy changes, analysts say.

Fortress Capital founder and CEO Datuk Thomas Yong points out that if Trump’s policies lead to inflationary pressures, interest rates are likely to stay high, which will make dividend stocks less expensive. “If the investors’ objective is to obtain regular income via dividends, they should stay invested as we think it is still early to [come to a conclusion] on the effect of the Trump policies.”

Given the undemanding valuation for Asian equities, Yong is of the view that investors should stay invested in this region with a focus on fundamentally sound companies. “For now, a lot of expectations might [already] be priced into the market. We would like to monitor further the actual implementation of policies and geopolitical development,” he adds.

Kenny Yee, head of research at Rakuten Trade, says banking stocks are a better choice for now, partly because they are good dividend payers. “The key is capital preservation for times like this.”

Although dividend yields may have been lower since the banking rally early this year, Bank Islam Malaysia Bhd (KL:BIMB) and RHB Bank Bhd (KL:RHBBANK) generate dividend yields of 6.2%, while Malayan Banking Bhd (KL:MAYBANK) offers 5.7% and Alliance Bank Malaysia Bhd (KL:ABMB) 5%.

He believes the rise in tech stocks in response to the Trump presidency was just a knee-jerk reaction, and that investors should be vigilant about stocks with high valuations.

In the first four trading days last week, Bursa Malaysia’s Technology Index gained 7.1% against the benchmark FBM KLCI’s 1.2% rise.

Tradeview Capital CEO Ng Zhu Hann favours dividend stocks over growth stocks in the short term because of earnings and valuation concerns relating to tech stocks.

“Investing in high-yielding companies with robust earnings and cash flow is a good choice, as growth stocks may not be an ideal option for at least the next one to two quarters. Valuations of tech stocks in the US are already very high, so there’s a lot of room for a correction. Due to the correlation, our tech index will be impacted when the US tech index falls,” he tells The Edge.

While valuations for local tech stocks have eased, Ng observes that their earnings have been affected by the stronger ringgit. “If you believe that the ringgit is going to continue to strengthen towards the 4-4.10 level, you may see that the earnings impact for the tech sector will be even more significant compared with other sectors.”

That said, local tech stocks surged last week after Trump claimed victory in the presidential election. The rise in the greenback, meanwhile, pushed the ringgit’s depreciation past the 4.40 level.

As part of fundamental investing, Areca Capital Sdn Bhd CEO Danny Wong says more investors could be looking at investing in high-yielding stocks for better returns.

Following the announcement of a 2% tax on dividend income of above RM100,000 a year in Budget 2025, he says investors may also benefit from bumper dividends from family-controlled companies with a huge cash flow.

Ng’s high-yielding stock recommendations include insurer Allianz Malaysia Bhd (KL:ALLIANZ) (4.7%), timepiece and electronic product distributor Marco Holdings Bhd (KL:MARCO) with 13.8%, and Media Chinese International Ltd (KL:MEDIAC) with 5.4%.

Ng also recommends that investors consider real estate investment trusts (REITs), as the average dividend yield for the industry is about 5%. According to Bloomberg data, REITs remain a good option for those seeking high-yielding stocks. A handful offer a dividend yield of above 6.5%, including Sentral REIT (KL:SENTRAL) (8.1%), AmFirst REIT (KL:AMFIRST) (7.6%), YTL Hospitality REIT (KL:YTLREIT) (6.8%) and CapitaLand Malaysia Trust (KL:CLMT) (6.8%).

Among the big-cap stocks, Bermaz Auto Bhd (KL:BAUTO) continues to be one of the high-yielding choices on Bursa Malaysia given its dividend yield of 8.6%. CIMB Securities said last month that shareholders of the automotive player could receive a special dividend from its 30%-owned associate Mazda Malaysia Sdn Bhd, which may serve as a rerating catalyst for the stock.

While Genting Malaysia Bhd (KL:GENM) could be replaced by Gamuda Bhd (KL:GAMUDA) in the next review of the FBM KLCI constituents early next month, the former’s 6.6% dividend yield is relatively appealing.

It is worth noting that DXN Holdings Bhd (KL:DXN), a health and wellness-oriented direct selling firm, has a dividend yield of 6.3%, as its share price performance has been lacklustre since its relisting on the local bourse in May 2023.

In the mid-cap space, low-profile Formosa Prosonic Industries Bhd (KL:FPI) has been consistently paying decent dividends over the years. In FY2023, it declared a 23 sen dividend, which translated into a dividend yield of 8%.

Property firms Eco World International Bhd (KL:EWINT) and Paramount Corp Bhd (KL:PARAMON) are generating dividend yields of 40% and 6.8% respectively. Eco World International paid a bumper dividend of 33 sen per share last year following the completion of its capital reduction exercise.

For lower liners, PBS Bhd (KL:PBSB) (formerly Pelikan International Bhd) topped the high-yielding list as it undertook a capital repayment exercise by way of cash distribution of 75 sen per share following the completion of the disposal of its stationery business Pelikan Group GMBH to Holdham SAS for RM695.4 million.

Furniture stocks Jaycorp Bhd (KL:JAYCORP) and Poh Huat Resources Holdings Bhd (KL:POHUAT) have stable dividend payouts, giving yields of 5.8%.

Also worth mentioning are Scicom (MSC) Bhd (KL:SCICOM) and CSC Steel Holdings Bhd (KL:CSCSTEL), which have rewarded shareholders with a dividend payout of 8.4% and 7.9% respectively.

Investors should note that there is no guarantee of the same dividend yield being paid out by the companies based on the past 12-month track record. Moreover, they should not expect much by way of capital appreciation.

But to be sure, investors still want returns that can beat their fixed deposits of around 4%.

It is even better if the returns are higher than the dividend payout from the Employees Provident Fund, which amounted to 5.5% for conventional savings in 2023.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.