EPF Dividend Of 5% To 6% Still Possible For 2022 Despite Lower 1Q22 Investment Income

Alex Cheong Pui Yin

7th July 2022 - 3 min read

Experts Warn Multi-Tiered EPF Dividend Structure Will See High-Income Earners Taking Funds Out — (Image: BusinessToday)

The Employees Provident Fund (EPF) is said to be still capable of delivering a dividend of 5% to 5.5% dividend for 2022, despite the dip in its investment income for the first quarter of 2022 (1Q22).

Last month, the EPF had revealed that its investment income for 1Q22 was recorded at RM15.85 billion, which is 17.8% lower year-on-year, as compared to the total investment income of RM19.29 billion earned during the same quarter in 2021. The 1Q22 investment income is also 16.7% lower quarter-on-quarter.

A report by news portal The Edge highlighted that while the drop in earnings was unfortunate, the EPF’s gross income investment for 1Q22 was still 13.6% above its five-year quarterly average of about RM14 billion. Meanwhile, the net investment income of RM14.76 billion for the same period is also still above three of its four quarterly performance in 2021.

(Image: Free Malaysia Today/Miera Zulyana)

Given these figures, the EPF still have enough funds in its accounts to match the size of its dividend payout of RM56.72 billion for 2021. This is provided that the EPF does not face any further substantial decrease in earnings, and that the amount needed to pay every 1% of dividend does not balloon significantly.

The report also acknowledged that the EPF may face headwinds moving forward due to various factors, especially given the volatility in global markets. The tightening of its monetary policies by the US Federal Reserve in a bid to tame inflationary pressures, for instance, will impact the EPF’s earnings. The ongoing Russia-Ukraine war, too, is set to worsen the circumstances.

The EPF itself acknowledged these challenges, with its chief executive officer Datuk Seri Amir Hamzah Azizan saying, “We had a strong start in the earliest part of the first quarter, but the situation took a turn as global markets suffered a decline, causing lower returns in bonds and equities throughout the remaining quarter.”

On top of these factors, the EPF also has to take into account the cost of the fourth Covid-19-related special withdrawal facility, which allowed its financially burdened members to withdraw up to RM10,000 each. With applications for the facility having closed in April 2022, it is estimated that the final amount approved for these withdrawals stood close to RM45 billion – which is equivalent to 4.4% of the EPF’s overall investment assets as of end-March 2022 (RM1.02 trillion).

Despite all the challenges, though, the EPF stressed that it will strive to ensure the health of its finances and portfolio – guided by its Strategic Asset Allocation (SAA) – to protect its members’ interests and future wellbeing. It will also continue to rebalance its position in stocks that are fundamentally strong but undervalued, as well as take a cautious stand in the next quarter to navigate the downside risks that it may face.

(Source: The Edge Markets)

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Alex Cheong Pui Yin

Previously covered recruitment-related stories and had a short stint as a copywriter for the property industry. She subsequently developed an interest in investment and robo-advisors.

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