This article first appeared in The Edge Malaysia Weekly on November 25, 2024 - December 1, 2024

THERE has been a noticeable rise in the number of companies declaring special dividends since Budget 2025 was tabled in parliament in October. Market observers believe that the rush to pay out special dividends is likely due to the 2% tax on individuals with dividend income exceeding RM100,000 annually, which will take effect next year.

A check of stock market filings between Oct 18 and Nov 21 shows that several of these companies paid out special dividends for the first time since listing, while others handed out special dividends for the first time in over a decade. 

There are also those like United Plantations Bhd (KL:UTDPLT),  that have been fairly consistent in rewarding their shareholders with special dividends yearly during the period in review.

“Yes, there has been an increase in the number of companies declaring special dividends recently, as expected. But what was surprising was that many more companies [than I anticipated] declared specials,” remarks a head of research at a research house.

Some of those companies that have recently declared special dividends include Pecca Group Bhd (KL:PECCA), Malaysia Smelting Corp Bhd (KL:MSC) (MSC), Kossan Rubber Industries Bhd (KL:KOSSAN) and Lysaght Galvanised Steel Bhd (KL:LYSAGHT).

It is worth noting that a majority of such companies have already declared more generous dividends for the financial year to date, compared with the total dividends dished out in the previous financial year. Their shareholders are in for a treat this year.

Between Oct 18 and Nov 21, Lysaght stands out as the company that has declared the highest payout in a special dividend of a whopping 35 sen per share for the financial year ended Dec 31, 2024 (FY2024), to be paid out on Dec 9.

This translates into RM14.56 million in total special dividends that the cash-rich company, whose net cash stands at RM97 million as at end-September, will fork out. 

Together with an interim dividend of eight sen per share, Lysaght’s shareholders would receive a total dividend per share (DPS) of 43 sen to date for FY2024. Only in FY2014 has the company made a bigger declaration, paying a DPS of 50 sen which some saw as “compensation” for its shareholders who suffered losses from the company’s aborted share split and bonus issue exercises.  

At 43 sen per share, Lysaght’s shareholders will pocket more than the cumulative nine months ended Sept 30, 2024 (9MFY2024) earnings per share (EPS) of 26.88 sen.

For 9MFY2024, the steel pole and masts maker recorded a 39% jump in net profit to RM11.18 million from RM8.02 million a year ago, while revenue increased 19% to RM72.81 million from RM61.02 million.

The company’s major shareholders are Lysaght (Malaysia) Sdn Bhd and Ingli Sdn Bhd, which hold a 55.14% and 15.46% stake respectively. The companies are linked to the husband and wife duo of Liew Swee Mio @ Liew Hoi Foo and Chew Mee Lee. Mee Lee’s father is the late Chew Kar Heing who was a founder member of the Lysaght Group of Companies while her sister, Chew Meu Jong is the listed company’s non-independent non-executive director.

In recent weeks, two companies on the stock exchange have dished out special dividends for the first time since listing.

One is MSC which announced a special dividend of 17 sen per share for FY2024 to be paid on Dec 23. The tin miner and metal producer also announced an interim dividend of seven sen per share, taking the total dividend declared so far to 24 sen for FY2024 — its highest dividend since FY2011, when it paid out 30 sen per share.

Its latest declaration is much heftier than the total dividends of 14 sen in FY2023 and seven sen each in FY2022 and FY2021. Based on its EPS of 11.7 sen for 9MFY2024, this brings the payout ratio to 205%, which exceeds its dividend policy by a long shot.

It was only in January that the company adopted a dividend policy targeting a payout ratio of at least 30% of net profit attributable to owners of the company.

Dr Tan Kheng Lian is the largest shareholder of MSC through her 51.96% shareholding in The Straits Trading Company Ltd (STC). Tan’s daughter, Chew Gek Khim is the non-independent non-executive chairman of MSC and also the executive chairman of STC.

Although the company’s third quarter ended on Sept 30, 2024, and net profit rose 20.88% to RM14.29 million from a year earlier on increased sales of refined tin and higher average tin prices, its revenue declined 35% to RM49.25 million compared with the previous year, dragged down by its tin smelting division.

The company has a net gearing of 0.22 times, based on net debt of RM187.2 million and equity of RM823.41 million.

Apart from MSC, Pecca also declared a special dividend for the first time since listing, amounting to 1.5 sen per share for its financial year ended June 30, 2024 (FY2024) that will be paid out on Dec 13. Including the special dividend, the total dividend payout for FY2024 amounts to 6.5 sen per share. Pecca’s total dividends have been increasing over the years. From FY2021 to FY2023, total DPS climbed from 1.7 sen to 2.1 sen, and then to 2.4 sen.

The car upholstery maker has seen a good FY2024, posting a much improved net profit of RM55 million, 55.4% more than the RM35.4 million it recorded in FY2023. The better performance was driven by higher production cost efficiency on top of sustained demand for its products and services.

Based on the FY2024 EPS of 7.323 sen, the dividend payout ratio stands at 88.79%, which is more than double its dividend policy target of 40%. Pecca’s largesse did not stop there as it has also started to reward shareholders for FY2025. Following its financial results announcement for the quarter ended Sept 30, 2024 (1QFY2025), it declared a first interim dividend of 1.5 sen per share to be paid out on Dec 20.

For the quarter, net profit improved 12% to RM14.58 million despite a 12% decline in revenue to RM55.91 million from a year ago.

Pecca’s major shareholder is its group managing director and founder Datuk Teoh Hwa Cheng, who holds 50.48% equity interest through MRZ Leather Holdings Sdn Bhd. He also has 3.3% direct stake in Pecca.

More surprising was Kossan’s special dividend, which it declared during its recent earnings announcement for the third quarter ended Sept 30, 2024 (3QFY2024), given its 28.15% year on year decline in net profit to RM29.44 million.

Apart from the two sen per share interim dividend, the glove maker also declared an eight sen per share special dividend for FY2024, which will be paid out on Dec 12. This brings the total DPS for FY2024 to 10 sen, with another quarter to go.

But Kossan has had a super year so far as net profit for the cumulative nine months ended Sept 30 surged seven times to RM92.33 million from RM13.42 million a year ago.

The last time the company paid a special dividend was in FY2020. Its eight sen per share special dividend for the year took total DPS for FY2020 to 14 sen.

Even so, nothing compares with the total dividend payout that Kossan dished out in FY2021 of 48 sen per share following a super profit stemming from the Covid-19 pandemic.

Net profit in FY2021 increased by more than 1.5 times to RM2.85 billion from RM1.08 billion in the previous year as the pandemic boosted demand for gloves.

Kossan’s biggest shareholder is group managing director and CEO Tan Seri Datuk Lim Kuang Sia through Kossan Holdings (M) Sdn Bhd’s 35% stake. Directly, Lim holds 2.75% equity interest.

While some companies have decided to dish out special dividends before 2025, there are also some who have declared interim dividends for the first time.

Property company Plenitude Bhd (KL:PLENITU) declared an interim dividend of five sen per share for the financial year ended June 30, 2025, to be paid out on Dec 18. The payout represents 86% of the company’s EPS of 5.8 sen for the first quarter ended Sept 30, 2024 (1QFY2025).

In 1QFY2025, Plenitude reported a 10.9% decline in net profit to RM22.06 million from a year ago while revenue also fell 11.2% to RM136.48 million previously.

With the year coming to a close soon, Rakuten Trade head of equity sales Vincent Lau believes the market is likely to see more announcements of special dividends in the coming weeks.

Some observers believe that major shareholders of these companies, that hold their shares in the listed company via their private vehicles, would take the opportunity to pay out dividends to themselves before the year ends, “to save some money” before the dividend tax comes into effect next year.

The proposed dividend tax only applies to individual shareholders receiving dividend income from company profits exceeding RM100,000 at a rate of 2%. There are several exemptions to dividend income received. These include dividend income received from companies that received pioneer status, and reinvestment allowances will be exempted from tax as well as income from shipping companies that is exempted from tax. 

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