PETALING JAYA: Economists broadly expect the Employees Provident Fund’s (EPF) 2025 dividend to come in between 6.3% and 6.8%, supported by strong global asset performance, a more stable interest rate environment, and favourable domestic conditions such as a firmer ringgit and attractive bond yields.

Speaking to SunBiz, some experts point to gains in equities, bonds and metals – boosted by AI-led market momentum and expectations of a dovish US Federal Reserve – while noting EPF’s diversification and sizeable overseas exposure as key income drivers.

However, others caution that while the payout would be strong, it likely sits near the upper end of EPF’s long-term range, with a more sustainable level closer to 6.0% to 6.3%.

Independent macro strategist Suresh Rama expects a dividend payout of between 6.5% and 6.8%, supported by global and domestic factors.

“I am expecting a dividend payout of between 6.5% and 6.8%. I believe the dividend yield will be higher than previously, as lower interest rates globally have favoured asset classes such as metals, equities and bonds,” he said.

Suresh pointed to the sustained bull run in the Dow Jones Industrial Average, supported by expectations of a dovish monetary policy outlook from the US Federal Reserve.

“The emergence of AI and technology stocks is propelling various industries in the global market. This is becoming the new norm, rather than relying on traditional sectors that drove equity markets in the late 1990s and early 2000s,” he added.

Suresh said Bursa Malaysia, though defensive in nature, has remained steady and continues to serve as a buffer against volatility for local asset managers.

He also noted that Bank Negara Malaysia’s relatively accommodative interest rate environment has supported valuations of local corporate and government bonds. “Lower yields have pushed up bond prices, suggesting mark-to-market gains for bond portfolio holdings.”

In addition, metals have surged amid rising demand from AI-related industries, particularly those linked to rare earth minerals, benefiting segments exposed to the supply chain.

Juwai-IQI Holdings chief economist Shan Saeed said the higher dividend projection reflects EPF’s scale, diversification and asset allocation discipline, alongside a more stable global rate backdrop and domestic macro conditions anchored by Bank Negara Malaysia.

“A dovish Federal Reserve stance in 2026 would be supportive from a valuation perspective, while ringgit stability reinforces macro confidence,” he said.

Shan pointed out EPF declared a 6.30% dividend for both conventional and syariah savings in 2024, up from 5.50% in 2023 and 5.35% in 2022.

“The fund manages more than RM1.2 trillion in investment assets, with approximately 37% to 38% allocated internationally, contributing roughly half of total income in strong years,” he said.

Shan described the fund’s recent performance as the result of portfolio structure rather than short-term market timing.

He said the post-zero interest rate era has recalibrated return expectations, with normalised real yields and resilient global earnings supporting what he views as a sustainable dividend band rather than a cyclical overshoot.

However, Malaysian Rating Corporation Bhd senior economist Kamal Zharif Jauhari said a more sustainable long-term dividend range is around 6.0% to 6.3%, in line with historical performance.

“The 10-year average hovering near 6.0%, and outpaces Malaysia’s GDP growth. A dividend outcome of 6.3% to 6.5% would be slightly above the recent three- to five-year average.”

That said, he added, the dividend outlook should remain well-supported in the near term given the improving tone in Malaysia’s capital markets.

“This includes a firmer ringgit, attractive yields in MGS, and strengthening sentiment for domestic equities. This optimism is further underpinned by clear policy visibility through key national initiatives such as NSS, NIMP and NETR, which are crucial for driving investment flows and anchoring market confidence,” Kamal Zharif said.

Analyst Jason Loh Seong Wei said the higher projection could represent “the top of the cycle” as the global economy is expected to slow in the second half of 2026.

“This is when the full impact of US President Donald Trump’s tariffs finally sets in – with the US as the centre and affecting much of the global economy, including Malaysia.”

He said while the US economy currently appears strong, there are signs of rising layoffs that may not yet be fully reflected in official growth numbers. If job losses increase while prices remain elevated due to tariffs, the US could face “stagflation”, where inflation stays high but economic growth weakens.

“This would put the US Federal Reserve in a difficult position. Normally, central banks raise interest rates to fight inflation and cut rates to support growth. But if inflation and weak growth happen at the same time, policymakers would face a tough balancing act,” he said.

Loh noted that if US interest rates remain relatively high, this could attract capital flows into markets such as Malaysia and support a stronger ringgit. However, he warned that a stronger ringgit could hurt Malaysian exporters by making goods more expensive overseas, potentially squeezing corporate profits.

“If domestic profits start to slow in the second half of the year, it could lead to foreign investors pulling money out of the stock market, causing share prices to fall,” he said.

In such a scenario, Loh expects EPF to adjust its investment strategy by increasing its allocation to fixed income assets such as bonds, which are generally more stable than equities during uncertain periods.

Former chief economist Wan Murezani Wan Mohamad said the dividend depends largely on investment performance, which is mainly a function of macroeconomic and financial market conditions.

“In the context of EPF’s dividend, the 6.30% to 6.50% expected range is quite respectable from a historical perspective, as such a range is well above its average over the last 10 years.”

Wan Murezani said EPF’s ability to deliver such returns reflects its robust investment process, guided by a strategic asset allocation framework that ensures diversification across key asset classes such as bonds, equities and real estate.

“Furthermore, its exposures in foreign markets have also been a key in enhancing investment yield,” he said.

UCSI University Malaysia associate professor of finance Dr Liew Chee Yoong said the dividend projection suggests a strong year, but likely reflects the upper end of normal rather than a new baseline.

“EPF’s dividends over the past 10 years have usually been between about 5.5% and 6%. So the projection of 6.3% to 6.5% is on the higher side, but it’s not something totally unusual. It reflects a period when global markets and investments have been doing relatively well,” he said.

However, he noted EPF’s portfolio is exposed to global economic conditions, interest rates, currency movements and market volatility.

“So this range likely reflects a good phase in the investment cycle, not necessarily a new permanent level. Over time, it’s more realistic to expect EPF dividends to move within a range of roughly 5.5% to 6.5%, depending on how the economy and markets perform,” Liew said.

 The Sun Malaysia