What to Like About Singapore Technologies Engineering Ltd Now For Investors

Singapore Technologies Engineering Ltd (SGX: S63) is an engineering conglomerate with a few major business segments, namely, Aerospace, Electronics, Land Systems, and Marine.

The company, which is also known as ST Engineering, had recently reported its results for 2015. The results weren’t great – revenue and profit had both slipped by low single-digit percentages compared to 2014 – but I think there are actually still a number of things for investors to like about ST Engineering at the moment.

Diversified business activities

The business activities for ST Engineering are broken down into four main groups as mentioned, with Aerospace, Electronics, Land Systems and Marine accounting for 33%, 27%, 22%, and 15% of the company’s total revenue in 2015, respectively..

The diverse income stream can be highly beneficial to ST Engineering since no one business can bring down the whole company. For example, the Marine segment’s profit in 2015 had declined by 35% largely due to lower oil prices, yet ST Engineering’s profit in the year had dipped by only 1% as a result of a better performance in the other three segments.

ST Engineering’s business is not just diversified in terms of segments – it’s also diversified in terms of geography. Asia accounted for 62% of the company’s total revenue in 2015 with USA, Europe, and “Others” making up the rest at 24%, 5%, and 9%, respectively.

High returns generated

ST Engineering has managed to earn a high return on invested capital (ROIC) of 22% in 2015. The ROIC metric can be used to identify high-quality businesses; as a rule of thumb, a company with a ROIC of more than 15% can be considered as having a good business.

Dividend powerhouse

ST Engineering was listed on Singapore’s stock market back in December 1997. In 1998, the company had paid an annual dividend of S$0.068 per share. In 2015, this dividend has more than doubled to S$0.15 per share. Along the way, the company had also paid a dividend consistently in each year.

At ST Engineering’s current share price of S$3.07, it has a dividend yield of 4.9% thanks to its dividend in 2015.

One of the key things for dividend investors to consider is the sustainability of a company’s future dividends and this depends on the sustainability of the firm’s business.

ST Engineering has proven in the past that it can consistently pay a dividend to its shareholders. Though it’s impossible to predict the future, the fact that ST Engineering has had a good track record could be a prompt for investors to take a deeper look into the company. That’s especially so given the company’s thick 4.9% yield at the moment.

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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.