Based on my anecdotal experience, when investors think of dividend shares, the ones that come to mind are either real estate investment trusts (REITs) or blue-chip companies with stable earnings. Ascendas Real Estate Investment Trust (SGX: A17U) is an example of the former while Starhub Ltd. (SGX: CC3) can be a good example of the latter; both shares now carry high yields of 6.3% and 4.8% respectively based on their current prices and dividends for their last completed financial years. But, there are also some smaller, less well-known companies which have been paying stable dividends and offers a decent yield…
Based on my anecdotal experience, when investors think of dividend shares, the ones that come to mind are either real estate investment trusts (REITs) or blue-chip companies with stable earnings. Ascendas Real Estate Investment Trust (SGX: A17U) is an example of the former while Starhub Ltd. (SGX: CC3) can be a good example of the latter; both shares now carry high yields of 6.3% and 4.8% respectively based on their current prices and dividends for their last completed financial years.
But, there are also some smaller, less well-known companies which have been paying stable dividends and offers a decent yield of more than 5%. Here are three such companies.
1. QAF Limited (SGX: Q01)
QAF is the owner and maker of the famous Gardenia Bread. But, the company does more than just manufacture and distribute bread. QAF is also the largest producer of pork meat in Australia as well as the owner and operator of one of the largest single-site feed mills in the country. In addition, the company has an active trading and logistics business and a dairy farm in Victoria, Australia.
Source: S&P Capital IQ
For the purposes of my discussion here, QAF has been paying out steadily increasing dividends over its last 10-completed financial years as seen in the chart above. QAF paid out a dividend of 5 Singapore cents per share for its last financial year, which translates to a dividend yield of 5.15% at the company’s current share price of S$0.97.
2. BRC Asia Limited (SGX: B03)
BRC Asia is a construction firm with operations in Singapore and China. It focuses on using prefabricated steel reinforcement for construction projects. The company has been involved to some degree with iconic landmarks in Singapore such as Gardens by the Bay, Marina Bay Sands, Resorts World Sentosa, and Marina Bay Financial Centre.
Source: S&P Capital IQ
Although there’s some cyclicality involved with BRC Asia’s dividend (it might not be a surprise given BRC Asia’s construction-related businesses), the company has never missed paying a dividend in its last 10 financial years. More importantly, over the past few years, investors would have seen BRC Asia’s dividends increase from 0.8 cents per share to 1.7 cents per share (inclusive of special dividends). That translates to a dividend yield of 9.7% at its current price at S$0.175 per share.
3. Pan-United Corporation Ltd (SGX: P52)
Lastly, we come to Pan-United. The company, which has a long history in Singapore, can be considered the largest provider of cement and ready-mixed concrete in our city state. Besides providing cement and special concrete, Pan-United also has interests in a wide array of other businesses. For instance, the company also provides logistics and shipping services such as bulk cargo containment, value-added cargo processing, warehousing, and coastal shipping amongst others.
Source: S&P Capital IQ
These businesses have helped the company to pay out a dividend in each of its last 10 financial years, although there’s some cyclicality involved. At its current price of S$0.85, Pan-United carries a dividend yield of 5% based on its dividend of 4.25 Singapore cents per share for its last-completed financial year.
Although a high dividend yield is not always a sign of bargain, it can still be a good starting point for investors to investigate further. In the investigative process, questions investors need to think about include: 1) whether the dividend is sustainable, and 2) if the pay-outs can even grow in the future. So to be clear, all the above is not meant to be a buy or sell call for QAF, BRC Asia, or Pan-United as investors would still have to think about the future of these companies’ business.
A company carrying a high-yield might just see its share price tumble if its dividends ever get cut – that’s why it is important for investors to not fall into the trap of being attracted to a share just because it offers a high yield.
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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 Stanley Lim does not own any companies mentioned above