Dividend Handling Fees

Q&ACategory: QuestionsDividend Handling Fees
Rui Yow asked 5 years ago

Hi PC,
Local brokerage firms usually charge an amount of dividend handling charges, which can cost up to SGD10 per dividend distribution per company. If I wish to invest in REIT which distribute dividend quarterly, this could lead to a loss of SGD 40 per REIT just for the dividend handling charges every year. Given this cost will drag down the dividend yield I will receive, what is your advice on the initial investment amount for dividend income in either the SG and HK market?
Thank you in advance for your advice. 

1 Answers
paul wong answered 5 years ago

Based on my dividend payment scrips (some years ago as I have moved most of holdings into Singapore since), the dividend handling fee is SGD6 and HKD20 for Singapore and Hong Kong stocks respectively. On top of that, the local brokerages will charge RM10 admin fee. So easily you could be charged up to RM28 per dividend payment. 
Here’s how you can make the most of the dividends in REITs. Ideally, the REIT pays twice annually rather than quarterly. That could save you as much as RM56 a year. The other is to ensure that the amount of dividend paid per year is more than offset the handling fee. That is why it is essential to look at HK and Singapore REITs which pays 7.5% of more in dividends. As a rule of thumb, the minimum investment for HK and Singapore stocks should be at least RM3K. With a yield of 7.5% that would give you a minimum of RM225 in dividend and less the RM56 in handling fee, will yield you a net dividend of RM169 which is 5.6% in net yield. 
So the more quantities you buy the higher the net yield. Of course this has to depend on one’s own affordability.
The stock market could see heavy selling as market conditions sour due to the trade war between US and China, but it presents the opportunity to buy REITs at a lower price to further enhance the yield.
Hope the above helps.