KUALA LUMPUR: Lembaga Tabung Haji's 3.10 per cent profit distribution for 2020 signals a "quick" turnaround for Malaysia's pilgrim fund, a recovery that has started back in 2018, economists said.
They expect Tabung Haji to declare a higher dividend for 2021.
The fund's annual dividend payment hit a historic low of 1.25 per cent in 2018 before more than doubling the following year to 3.05 per cent.
This followed a massive restructuring involving the transfer of hundreds of its non-performing assets to the Minister of Finance Inc's wholly-owned Urusharta Jamaah Sdn Bhd for RM19.9 billion at book value.
Tabung Haji also rejigged its portfolio by buying more high-yield dividend stocks and selling more non-performing equities in pursuit of more stable returns.
Sunway University Business School economics Professor Dr Yeah Kim Leng said the profit distribution was reasonable since the 3.10 per cent was a positive real return.
"The performance signifies a quick turnaround since its bailout whereby a substantial non and underperforming assets were transferred to a special purpose vehicle set up by the Finance Ministry.
"To sustain performance its investment strategies may need to mirror the trust and pension funds that have shown relatively strong and stable track record such as the EPF (Employees Provident Fund) and PNB (Permodalan Nasional Bhd)," Yeah told the New Straits Times.
Putra Business School Assoc Prof Dr Ahmed Razman Abdul Latiff expects Tabung Haji to continue declaring higher dividend for 2021.
"I think the dividend announced by Tabung Haji this year is fair to depositors because even during the economic recession of 2020 where many equities lost their value and not forgetting real estates who suffered from drastically reduced demand, Tabung Haji still managed to declare higher dividend than 2019," Ahmed Razman said.
Last week, Tabung Haji declared the 3.10 per cent profit distribution with a total of RM2.24 billion payout for the year ended December 31, 2020 (FY20) to its nine million depositors.
The fund board said this was higher than the 3.05 per cent declared for FY19, involving a total payout of RM2.14 billion paid for the year.
Minister in the Prime Minister's Department (religious affairs) Datuk Seri Dr Zulkifli Mohamad Al-Bakri said Tabung Haji's financial performance remained positive in 2020 despite uncertainties affecting the global and domestic economic environment since late 2019 due to the Covid-19 pandemic.
Tabung Haji is entrusted to administer nearly RM77 billion in deposits of Malaysian Muslims.
As at February 26 this year, the fund's total deposits reached RM76.7 billion, its highest ever level, reflecting the confidence of depositors.
Ahmed Razman said moving forward, Tabung Haji must remain true to its organisational objectives which is to facilitate its depositor in performing hajj.
"Therefore, its investment strategies must not focusing on high risk investments but rather focusing on long-term returns. Nevertheless, there must be a mixed and diversified investment portfolio to cater for the annual operating costs, hajj management services, liquidity management to cater for withdrawal and dividend distribution."
He added that the current strategy seemed to work well with higher dividend announced for the past two years.
"With the improving economic outlook and higher deposits, the outlook for Tabung Haji in 2021 will be a positive one. Perhaps the only possible changes in Tabung Haji's investment strategy will be in term of investing more in equities in overseas market as foreign equity investments tend to give higher returns than local equites," he said.