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3 Dividend Growth Shares with Above-Average Yields

Ser Jing - Three Growth Shares Sharing Their Earnings With You (pic)

In Singapore, when the term ‘market average’ is used, it generally refers to the fundamentals of the Straits Times Index (SGX: ^STI), which is in turn an aggregation of the financials and figures of the 30 blue-chip shares that make up the index.

For an investor wanting to get an ‘average’ yield that’s in-line with the market, an easy way to do so would be to invest in an index-tracker like the SPDR Straits Times Index ETF (SGX: ES3), an exchange-traded fund that aims to mimic the movement and fundamentals of the Straits Times Index.

Based on where the ETF was at on 24 June 2014, investors could get a distribution yield of 2.67%. That would be an acceptable gauge for a ‘market-average’ yield. For those of you wanting higher and growing dividends, there’re always individual shares to turn to.

Shares with growing dividends

Boustead Singapore (SGX: F9D), ARA Asset Management (SGX: D1R), and Second Chance Properties (SGX: 528) are three companies that have almost nothing similar in terms of their business activities. But, there is a big similarity in terms of their financials: Despite differing levels in the consistency of growth, the trio have had dividends with an unmistakable upward trend over the past decade or so. Here’s a table showing their dividend record:

Dividends per share (Singapore cents)

Last 10 completed financial years

Boustead ARA Second Chance

Year 10

0.75

Year 9

1.50

Year 8

1.00 1.60

Year 7

3.25 1.92

Year 6

5.00 2.62

2.16

Year 5 4.00 3.04

2.40

Year 4 5.50 3.31

2.80

Year 3

7.00

3.96

3.04

Year 2

5.00 4.55

3.20

Year 1 7.00 4.55

3.258

Last completed financial year 7.00 5.00

3.40

Source: S&P Capital IQ

Their businesses

Boustead Singapore is a mini-conglomerate that makes use of its engineering expertise to help design and build industrial parks and facilities, water treatment plants, and other systems that are in use in both the upstream and downstream portions of the oil & gas industry. The company also holds exclusive distribution rights for world-leading geographic information systems (GIS) and location intelligence solutions in countries such as Australia, Singapore, Malaysia, and Indonesia, amongst others.

The company has had an impressive historical track record in its industrial real estate, oil & gas, and technology distribution business. For instance, as of December 2013, Boustead Singapore has executed more than 125 industrial real estate-related projects worth a combined S$2.2 billion; its oil & gas business has clocked more than 270 projects with a total value of S$1.2 billion in at least 50 different countries, and; its technology distribution arm had shown 11 years of consecutive top-line growth.

Meanwhile, ARA Asset Management is a manager of real estate investment trusts, private real estate funds, actual real estate, and a provider of corporate advisory services. Some of the REITs it manages include Cache Logistics Trust (Singapore-listed), Suntec REIT (Singapore-listed), Fortune REIT (dual-listed in Singapore and Hong Kong) and AMFirst REIT (Malaysia-listed).

As the general source of income for the company is tethered to the amount of assets it’s managing, investors might be pleased to know that its assets under management has grown from S$9.5 billion at the end of 2007 (the year it got listed) to S$25.4 billion as of March 2014. That’s an impressive annual compounded growth rate of 17%.

Finally, Second Chance Properties is a gold retailer; a designer and retailer of fashion apparel for the Malay female community under the First Lady brand; and a property owner of 57 pieces of real estate in Singapore and Malaysia.

There’s a big change going on with the company with its shareholders having recently approved the sale of 45 out of its 57 properties for a total sum of S$175 million (that’s a substantial premium over the book value of S$135 million for those 45 properties as of 31 August 2013).

Once the transaction is completed, Second Chance Properties will emerge with a debt-free balance sheet after paying down S$80 million worth of borrowings. In addition, the company would be reinvesting the rest of the proceeds to expand its First Lady business and to purchase properties in Malaysia. There are currently 43 First Lady stores (3 in Singapore, 40 in Malaysia) and the company has a goal to hit 100 stores in Malaysia “in the next few years.”

Foolish Bottom Line

At Boustead Singapore, ARA Asset Management, and Second Chance Properties’ current share prices of S$1.87, S$1.765, and S$0.47, respectively, they have yields that are above the market average; the trio have trailing dividend yields (based on the dividends for their last completed financial year) of 3.7%, 2.8%, and 7.2%.

Despite having a strong track record of dividend growth, this does not automatically make them suitable investments for income investors. Much more study has to go into their businesses to determine the presence or absence of any sustainable competitive advantages before a more definitive conclusion of their investment merits can be given.

That said, shares that have displayed solid dividend growth are as good a starting point as any for income investors in the search for potential opportunities.

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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 Second Chance Properties.