Singapore Telecommunications Limited (SGX: Z74), as many of you may know, is the largest operational telco in Singapore.
Over the last 12 months, Singtel’s stock price has declined by 10.7% to S$3.43, and it is currently trading close to its 52-week low of S$3.41. Clearly, the company is disliked by the market.
But, there are still things to like about the company. One of them is Singtel’s high dividend yield – right now, the telco has a yield of 5.1%, based on its current price and dividend for its fiscal year ended 31 March 2017 (FY2017). But apart from its yield, I also want to highlight two important reasons why investors should like the company’s dividend.
Track record of stable business performance
One important criteria that dividend investors should focus on in assessing a stock is how well its underlying business has performed.
A good track record of growth will provide assurance that the company has a high likelihood of being able to sustain its business growth, and by extension, its dividend payments.
As for Singtel, the company has a track record of producing stable business results over the past few years:
Source: Singtel annual report
As the table above shows, from FY2013 to FY2017, Singtel’s EBIT (earnings before interest and taxes) had grown by 10.1% from S$5.18 billion to S$5.70 billion, while its underlying earnings per share had climbed by 7.5% from S$0.2266 to S$0.2435. It’s worth noting that fluctuations in the company’s EBIT and underlying earnings per sahre have been minimal too.
Track record of stable dividends
A company’s business track record will mean little to dividend investors, unless it also pays its profits as dividends to its shareholders.
Singtel has done well on the dividend-front. The company has grown its annual dividend from 16.8 cents per share in FY2013 to 17.5 cents in FY2017. What’s more, the dividend has been maintained at less than 77% of its earnings in that period, which indicates sustainability in the payouts.
A final word
Dividend investors may want to take a close look at Singtel given its stable historical business performance and dividend payouts.
We believe we’ve identified a dividend dynamo whose financials are strong enough to qualify its dividend as “safe” – and have profiled this stock in a research report that’s now available to download completely free of charge. Simply click here to claim your copy today!
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.