Three Fast Dividend Growers

Big dividend yields are fantastic. But the thing is, it is growing dividends that are likely to be more important in creating outsized gains for investors over the long-term.

Just take this piece of research done by financial research outfit Ned Davis Research that’s shared by my American colleague Brian Richards. Turns out, in the 38 years starting from 1972 and ending in 2010, every US$100 invested in shares that grew its dividends or initiated one had become US$3,200. In comparison, the same US$100 plonked into shares with no changes in its dividends became less than US$1,500.

That’s not all. Based on Yale economist and Nobel prize winner Robert Shiller’s data, the nominal (unadjusted for inflation) dividend for the American stock market index, the S&P 500, was at US$0.26 in January 1871. For December 2012, the index’s dividends stood at US$34.99. That’s a 13,358% increase in dividends over 142 years and is a big reason for the S&P 500’s 51,732% return in real terms (i.e. adjusted for inflation) from 1871 to 2011 after accounting for gains from reinvested dividends.

The two examples above showcase the power of growing dividends and is something that investors should not dismiss.

In that spirit, here are three shares that have displayed some serious growth in dividends over the past decade, even if the growth hasn’t exactly been consistent.

1. Super Group (SGX: S10)

The snacks and instant beverage maker has grown its dividends from 0.624 Singapore cents in 2002 to 7.1 cents in 2012. That’s a total gain of 1,038%, or a compounded annualised growth rate (CAGR) of 27.5%. It’s currently trading at S$3.72 for a historical dividend yield of 1.9%, a fair bit lower than the Straits Times Index’s (SGX: ^STI) yield of around 2.7%.

Super Group’s share price fell to a low of S$3.03 last November after releasing disappointing third quarter results that saw a 17% year-on-year decline in quarterly profits to S$18.7m. But, the company’s shares have since rebounded by a fair bit and are valued at 21 times trailing earnings based on its current price.

Year Dividend (Singapore cents)
2002 0.624
2003 0.78
2004 1.20
2005 1.60
2006 1.60
2007 1.60
2008 1.60
2009 2.60
2010 5.40
2011 5.80
2012 7.10

Source: S&P Capital IQ

2. Raffles Medical Group (SGX: R01)

The operator of the eponymous Raffles Hospital in Singapore, along with a host of medical centres and clinics, also has an overseas presence with four medical centres in Hong Kong and Shanghai.

The company had announced in the middle of last December that it would be buying a property located at 100 Taman Warna, Singapore, for S$54.8m in a bid to expand its operations here. Raffles Medical intends to use around S$65m to redevelop the property into a 5-storey commercial building with a gross floor area of 62,720 square feet.

The company would be using 9,000 square feet on the first and fifth levels of the property for its healthcare facilities while the rest of the compound would be leased to retail shops, food & beverage outlets, and DBS Bank.

Dividends for the company were at 1.82 Singapore cents per share back in 2002 and have since jumped by 147% – or 9.5% per year on average – to 4.5 cents in 2012.

Raffles Medical’s shares last changed hands at S$3.08, giving it a historical dividend yield of 1.5% and a trailing-12-months price earnings ratio of 26.

Year Dividend  
2002 1.82
2003 2.27
2004 2.27
2005 2.72
2006 3.63
2007 2.50
2008 2.50
2009 3.00
2010 3.50
2011 4.00
2012 4.50

Source: S&P Capital IQ

3. Jardine Cycle & Carriage (SGX: C07)

The company owns 50% of Indonesian conglomerate Astra, and through this holding, has business interests that span from automobile dealership to insurance, and oil palm plantations to consumer loans.

Astra, which is exposed to a huge slice of the Indonesian economy, contributes more than 90% of Jardine Cycle & Carriage’s revenue. By virtue of that fact, the latter company is affected heavily by the on-goings of Singapore’s southern neighbour.

Jardine Cycle & Carriage, which is majority owned by the conglomerate Jardine Strategic Holdings (SGX: C07), has not had a good 2013 as it suffered a decline in corporate profits while Indonesia’s economy showed signs of slowing growth.

Nonetheless, the company’s history of dividend growth has been stellar. It paid out US$0.09 per share in dividends in 2002 and that has since shot up by 1,267% – or a CAGR of 30% – to US$1.23 in 2012.

At a price of S$37.50, shares of Jardine Cycle & Carriage are valued at 13 times trailing earnings and carry a historical dividend yield of 4%.

Year Dividend (Singapore cents)
2002 US$0.09
2003 US$0.09
2004 US$0.10
2005 US$0.18
2006 US$0.20
2007 US$0.43
2008 US$0.50
2009 US$0.58
2010 US$0.98
2011 US$1.23
2012 US$1.23

Source: S&P Capital IQ

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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 writer Chong Ser Jing owns shares in Super Group and Raffles Medical Group.