DIVIDEND POLICIES OF PROPERTY COMPANIES LISTED IN SINGAPORE

Abstract

Consistent with Singapore's efforts to be a world-class financial centre, the Monetary Authority of Singapore (MAS) issued a set of regulatory guidelines for the setting up of property funds in Singapore in May 1999. The anticipation of this new, yet to be implemented investment option has induced the motivation to study the dividend policies of property companies listed in Singapore for some indication on the likely return characteristics of real estate investment trusts (REITs). The imperfections of the market situation have raised the issue of the relevancy of dividend policy. To derive at an appropriate decision, a company will have to consider the many trade-offs in setting its dividend policy and these may become factors which determine the dividend policy. This study seeks to establish a link between dividend policy and corporate's capital investment decisions. The study is divided into two parts. The first part provides a qualitative analysis on the dividend policies of the property companies in Singapore while the second part uses a model to investigate the determinants. The findings indicate that earnings and dividends are positively related and that property companies in Singapore prefer to distribute stable dividends. In addition, asset growth rate, tax and property market condition are three significant factors found to affect dividend policies. This ties in with the key hypothesis that dividend policy and capital investment are related. Together, these findings provide an overview of the dividend policies' framework for a better understanding of the dividend decisions of property companies listed in Singapore and hopefully, an insight of what REITs have to offer when they are implemented.