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Three Sturdy Dividend Mid-Caps

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Most investors in Singapore might be familiar with the Straits Times Index (SGX: ^STI). It’s made up of 30 of the largest companies in Singapore by market capitalisation (no. of shares existing multiplied by the company’s share price) and is perhaps the most widely-quoted stock market barometer we have here.

But, what might not be that well-known is that there’s another list of companies, with slightly smaller market caps (known as the mid-caps), just waiting to climb into the blue-chip index. These companies – 50 in total – make up the FTSE ST Mid Cap Index (SGX: FSTM).

The mid-cap index is dominated by dividend-paying companies, business trusts, and real estate investment trusts. But of course, not all dividends are created equal.

REITs in particular, are generally highly-levered entities, making use of debt (also colloquially known as “other people’s money”) to acquire properties in order to collect rents to pay dividends to their investors.

The use of debt can actually be a smart financing tool and does contain its advantages. But, having a strong balance sheet with low or not debt can go some ways in protecting future dividend pay-outs.

Having more cash than debt gives a company precious breathing room to ride out tough economic environments while waiting for business to pick up. In the interim, its dividends might even be protected by utilising its cash hoard.

Keeping that in mind, let’s look at three dividend paying mid-caps with sturdy balance sheets.

Osim International (SGX: O23) is one of Asia’s top brands in the healthy-lifestyle product category. Fans of the Hong Kong superstar singer-actor Andy Lau might even recognise him appearing in the company’s uDivine massage-chair commercials.

While Osim might be well-known for its massage-chairs and other products of similar ilk, it also has business interests in nutritional products retailers GNC and Richlife. In addition, the company became the majority owner of luxury tea-brand, TWG Tea in October this year.

Osim’s balance sheet for its recent third quarter earnings showed it carrying S$250m in cash while having only S$148m in total debt. The company’s results also showed decent growth as quarterly revenue went up 7% year-on-year while profits increased by 16%.

The company paid out a total of S$0.06 per share in dividends last year, giving it a historical dividend yield of 2.6% based on its current share price of S$2.28.

ARA Asset Management (SGX: D1R) is the next in line to joins us today with its latest balance sheet for the second quarter of 2013 showing S$31.9m in cash and total debt of S$23m.

The company manages REITs and private real estate funds – with S$23.5b worth of assets under its management as of 30 June 2013 – and also provides real estate management & corporate finance advisory services. Some locally-listed REITs under ARA’s management include Fortune REIT and Cache Logistics Trust.

At its current share price of S$1.82, ARA has a historical dividend yield of 2.5% based on its split-adjusted pay-out of S$0.0455 per share last year.

The company will be releasing its third quarter earnings tomorrow, so investors can have a look at how its balance sheet might have changed.

Finally, we have Singapore Post (SGX: S08). The company’s well-known as the go-to guy for our postal service needs here but it also has its fingers in other pies, which includes providing e-commerce logistics solutions such as warehousing, pick and pack, delivery and returns management for various businesses.

Its recent second quarter earnings (for the three months ended 30 Oct 2013) saw a 33% year-on-year rise in quarterly revenue to S$204m while profits climbed 8.5% to S$36m. SingPost’s balance sheet came in strong, carrying a cash hoard of S$367m with total debt of only S$228m.

For the financial year (FY) ended March 2013, SingPost paid out S$0.0625 per share in dividends, unchanged since the FY ended March 2007. With that dividend, the company’s shares carry a historical dividend yield of 4.7% at its current price of S$1.32.

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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.