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What To Like About Singapore Telecommunications Limited

Singapore Telecommunications Limited (SGX: Z74) is Asia’s leading communications group with operations and investments around the world.

With significant operations in Singapore and Australia, the Group provides a wide spectrum of multimedia and infocomm technology (ICT) solutions that include voice, data and video services over both fixed and wireless platforms.

The Group’s presence in Asia Pacific and Africa spans 25 countries with 577 million mobile customers. These include India, Indonesia, the Philippines and Thailand.

Below are a few reasons to like about this business:

Market leadership

Most of us know that SingTel is the main player in Singapore. Yet, many of us may not be aware that it is also the clear leader in countries such as Thailand, India and Indonesia, whilst playing significant roles in major markets such as Australia, Philippines and Africa.

Sustainable and diversified earnings

Though it is known as SingTel, the company derives about three quarters of profit outside of Singapore. In addition, it provides a much-needed service, namely, voice, data and other communication services to customers, which could be sustainable for the long term.

High barriers to entry

The heavy capital investment needed in the telecom industry acts as significant barrier to entry. Moreover, the scale requirement in the industry also reduces the viability of a new player to compete against the incumbents.

Growth opportunity

SingTel operates in many countries either directly or through associates. These markets are growing at a faster pace than Singapore, which could provide the company with potential growth for many years ahead.

Sustainable dividend payout

SingTel has a policy of paying about 65% to 70% of profits annually in the form of dividends. In the last 10 years, it has delivered consistent and rising dividends.

At today’s price of $3.85 per, shares in SingTel have declined by about 40% from their high of $4.50, which translate to a dividend yield of about 4.55%. That is higher than the market average.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.