Just this morning EPF announced its Q3 results for the year 2017. With the year end approaching, it is time to analysis if we would have a good dividend for the entire year of 2017.
As usual, press releases are meant to make everything sounds beautiful. Is the result really positive? Let's look into the numbers again.
Based on the annual report and quarterly report of 2016 and 2017 found on their official website, I put these numbers into a chart.
Facts From The Numbers
1. The total asset value increases by 10 to 35 billion ringgit every quarter. By now, the amount should have already breached RM800 bil in Q4.2. In Q4 2016, there is massive jump in income due to a few reasons such as rising stock prices since Trump's Presidential election win and sale of a few property assets by EPF in London (among other strategies used to regain income)
3. In order to have a good financial year 2017, income in Q4 2017 would need to match or better last year's Q4 results.
4. RM46.56bil total income return in 2016 is about 6.37% of the total asset of RM731.11bil. If the total asset of EPF in Q4 2017 is around RM810bil, the income for the entire year needed to be more than RM50bil to match that return. Which means Q4 2017 need to be more than RM14bil in income.
Speculative Views
Since next year is election year, dividend payout will need to be as 'healthy' and promising as possible. They would need to generate the maximum potential gains from their investments while keeping valued assets for the future.It is public knowledge that EPF is known to cashout on investments in the last quarter of the year by offloading shares and selling assets to boost its profits. It will only come down to which assets or stakes of company are they willing to let go or reduce?
Your Future Retirement Planning
Now, we are aware that our pension fund is as huge as RM800bil in asset value. The question is will it be able deliver the average of 6% dividend annually? It would mean that it will need to generate income of more than RM50 bil next year and upwards every year after that.Historically, the average for the past ten years is lower than the returns in 1980's-1990's (Source: EPF Historical Returns)
This is why you would need to reduce your dependency on purely EPF alone. How you can do it is through:
1. Diversifying your retirement fund through EPF's Member Investment Scheme into selected and approved unit trust investments.
2. Start your own concurrent program through Private Retirement Schemes.
