2 Charts About Singapore Telecommunications Limited’s Dividend That Investors Must See

Local telecommunications powerhouse Singapore Telecommunications Limited (SGX: Z74) is one of Singapore’s largest companies with its market capitalisation of nearly S$57 billion. It’s also a firm with a tantalizing dividend yield.

At its current price of S$3.55, Singtel has a yield of 4.9% thanks to its annual dividend of S$0.175 per share in its fiscal year ended 31 March 2015 (FY2015). In contrast, the SPDR STI ETF (SGX: ES3) – an exchange-traded fund tracking Singapore’s market barometer, the Straits Times Index (SGX: ^STI) – has a smaller yield of 3.4% at the moment.

Given Singtel’s size and its yield, it’s likely to be a popular dividend stock for investors. Here are two charts which could give us more insight into Singtel’s payouts.

The first chart shows Singtel’s annual ordinary dividends over the past decade:

Chart 1 - Singtel's ordinary dividends per share

Source: S&P Capital IQ

One key takeaway here is that Singtel has consistently paid an annual dividend over the past decade and those payouts have even been growing. These traits could give Singtel’s investors some confidence in its ability to continue paying a dividend in the years ahead.

The amount of dividends however, is another story, and some clues could be gleaned in the second chart, which illustrates Singtel’s payout ratios (the ratio of its dividends over its earnings as well as the ratio of its dividends over its free cash flow):

Chart 2 - Singtel's payout ratios

Source: S&P Capital IQ

Payout ratios can give us a feel of how much room for error a company has when it comes to its ability to maintain or grow its dividends in the future. Generally speaking, the lower the payout ratios, the better. In Singtel’s case, it started the decade under study with a solid payout ratio of less than 50%. Unfortunately, as time progressed, the telco’s payout ratios have started climbing and are now around the 75% mark.

Investors who are banking on Singtel for its future dividends would have to be aware that the telco’s payouts now have a slimmer cushion when it comes to absorbing any hiccups in the business.

All told, Singtel’s dividend history is likeable, but there are risks to note in relation to the telco’s ability to sustain or raise its payouts in the future.

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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.