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Would This Share Give Bigger Dividends Soon?

We’re in the midst of the earnings season and there would be a fair share of companies reporting their latest full-year results soon. One such company is commercial testing and inspection firm Vicom (SGX: V01), which would be announcing its full year results for 2013 on 11 Feb 2014.

Since 2008, the company, a majority-owned subsidiary of land transport outfit ComfortDelGro Corporation (SGX: C52), has grown its annual dividends with each consecutive year. Investors have even seen its dividend almost double from 9.25 Singapore cents per share in 2008 to 18.2 Singapore cents in 2012. With such a strong track record of dividend growth, it’s perhaps natural to ask, would the company’s full-year pay-out for 2013 be higher than that of 2012?

As stated in its 2011 annual report, Vicom has a “declared dividend policy of 50%”. In other words, the company’s committed to paying out to shareholders at least half of its earnings each year as dividends. And over its past five completed financial years, the company has even exceeded that pay-out ratio.

Year

Vicom’s pay-out ratio

2008

50%

2009

50%

2010

63%

2011

61%

2012

61%

Source: Vicom’s annual reports

For the first nine months of 2013, Vicom’s profits have increased by 7% year-on-year to S$21.1m. And, it had also declared an interim dividend of 8 Singapore cents during its second quarter earnings release, some 6.7% higher than the interim dividend of 7.5 cents from the corresponding period in the previous year.

During its third quarter earnings release, the company’s management also commented that the demand for its testing services “is expected to remain favourable” and that its non-vehicular testing services “are expected to grow despite the keen competition.”

If the company manages to keep up its earnings momentum and maintains the pay-out ratio in the same ball park as it did from 2010 to 2012, investors could then be looking at a higher annual pay-out come 11 Feb 2014.

But of course, nothing’s cast in stone and investors would only know for sure over the next few weeks.

Vicom’s shares have jumped some 11.2% since the start of the year even as the Straits Times Index (SGX: ^STI) is down around 4% or so. But even after its gains, Vicom’s shares still carry a higher dividend yield than of the market average.

At its current price of S$5.45, Vicom has a dividend yield of 3.3% (based on the dividend for its last completed financial year) as compared to the index’s yield of around 2.7% based on data provided by the index tracker, the SPDR Straits Times Index ETF (SGX: ES3).

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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 doesn’t own shares in any companies mentioned.