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3 More Dividend Stocks with Healthy Yields

A recent Straits Times headline said “4 in 10 Singaporeans not saving for retirement”. It’s alarming because the article cited how many Singaporeans still “continue to rely on their Central Provident Fund savings as their basic nest egg”. Don’t get me wrong – the CPF is a great savings scheme. But your money only grows at a rate of 2.5% per annum, which barely keeps pace with inflation.

However, an investment in dividend-paying shares could help mitigate this problem as these shares, if properly selected, could provide growing income each year through dividends as well as capital growth.

However, not all dividend-paying shares are equal. We need to know if the paid-out can be sustained. Fortunately, there are some simple financial figures that can help sort the wheat from the chaff.

  • Dividends per share: A track record of steady dividend increases could show that management has shareholders’ interests in mind.
  • Earnings per share:  Growing EPS figures shows an increase in business value over time. This is good for shareholders as their slice of the business could slowly increase in value.
  • Free cash flow per share:  A nice trend of free cash flow increases could show that the business is able to generate excess cash that could be used to pay out more dividends, grow the business, or improve the balance sheet.
  • Cash and Debt levels: Cash is King. A business with more cash than debt is a sign of financial stability. This could give the business flexibility with regards to expansion opportunities, dividend pay-outs and daily business operations.

We have previously taken a look at 3 dividend-paying shares. Today, we’ll look at three more.

First up is vehicle and commercial inspection and testing firm, Vicom (SGX: V01). The company’s dividends have almost doubled from 2008, while its EPS has grown by 61%. Vicom’s shares, which are worth $5.09, currently have a dividend yield of 3.6% and PE of 17. The company recently said their ‘non-vehicular testing services are expected to grow despite keen competition’.

Vicom

2008

2009

2010

2011

2012

Dividends Per Share (cents)

9.25

11.80

16.10

17.60

18.20

Earnings Per Share (cents)

18.61

23.41

25.76

28.73

29.95

Free Cash Flow Per Share (cents)

24.01

25.19

19.08

20.78

29.52

Cash (in millions)

27.69

42.38

49.08

55.01

66.00

Debt (in millions)

0

0

0

0

0

*Note: Free Cash Flow is defined as Cash Flow from Operations minus Purchase   of Plant, Property & Equipment
**Note: All Per-Share figures are calculated using the undiluted share count

Super Group (SGX: S10), the instant-beverage maker, has grown its dividend by more than three-fold since 2008. The company has more than S$115m in cash and no debt. Last year, Super Group’s sales increased by 18% to S$519.3m and profits jumped 29% to S$82.6m.

The company’s growth has been propelled by its Food Ingredients business segment. Sales at this division grew from S$39.4m in 2010 to $164.2m in 2012. Super Group has been investing heavily in Food Ingredients, which accounts for most of the fall in free cash flow from 2011 onwards. It is also building a botanical herbal extraction production line that is expected to be completed by December this year. Its shares, which currently trade at $3.68, have a PE of 26 and a dividend yield of 1.9%, which is lower than the Straits Times Index’s (SGX: ^STI) yield of around 2.4%.

Super Group

2008

2009

2010

2011

2012

Dividends Per Share (cents)

1.60

2.60

5.40

5.80

7.10

Earnings Per Share (cents)

4.64

7.48

10.66

11.10

14.18

Free Cash Flow Per Share (cents)

5.11

11.07

7.46

-2.85

4.06

Cash (in millions)

28.57

73.56

145.02

124.53

115.17

Debt (in millions)

8.65

3.96

3.01

1.69

0

*Note: Free Cash Flow is defined as Cash Flow from Operations minus   Purchase of Plant, Property & Equipment
**Note: All Per-Share figures are calculated using the undiluted share count

Completing the trio of companies is Dairy Farm International Holdings (SGX: D01), which has 5,677 outlets in 12 territories. The company’s earnings have increased steadily, and its current balance sheet is flush with cash. Additionally, long-time shareholders have been rewarded with a 1,400% return (inclusive of dividends) since 2003.

Dairy Farm is part of the Jardine Matheson Group. The conglomerates crossholdings include Jardine Strategic Holdings (SGX: J37) and Jardine Matheson Holdings (SGX: J36). The company, which operates Cold Storage in Singapore, sports a lofty PE of 35 and a dividend yield of 1.96%.

Dairy Farm

2008

2009

2010

2011

2012

Dividends Per Share (cents)

30.00

16.00

18.00

21.00

23.00

Earnings Per Share (cents)

24.73

27.02

30.50

35.87

33.34

Free Cash Flow Per Share (cents)

20.34

16.27

34.52

38.28

30.22

Cash (in millions)

462.90

532.80

681.80

729.70

667.20

Debt (in millions)

467.10

499.20

458.40

263.60

146.40

*Note: Free Cash Flow is defined as Cash Flow from Operations minus   Purchase of Plant, Property & Equipment
**Note: All Per-Share figures are calculated using the undiluted share count
***Note: All financial figures are given in US currency

Motley Fool’s purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead. 

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Contributor Chong Ser Jing doesn’t own shares in any companies mentioned.