Income investors will tell you that the key to successful investing is not merely finding a company that can pay consistent dividends, but one that has the ability to grow its dividend distribution over the years.
However, it is not easy to find companies that have the capacity to consistently grow their dividends. Companies need to be able to increase their earnings each year, and have consistently stable cash flow to justify the dividend payout.
In fact, according to a report by Singapore Exchange Limited (SGX:S68), only five companies out of the 30 constituent stocks in the Straits Times Index (excluding REITs) have grown their dividend each year over the past five years. In an earlier article here, I talked about two of the companies. Here are two more companies that fit the bill.
Jardine Matheson Holdings Limited (SGX:J36), which was founded more than 180 years ago, is a conglomerate that, through its subsidiaries, engages in a range of business activities such as motor vehicles, property investment and development, and food retailing.
Jardine Matheson has an 84% interest in Jardine Strategic Holdings Limited (SGX: J37), which in turn, owns stakes in other listed subsidiaries. These include:
- 50% interest in Hongkong Land Holdings Limited (SGX: H78)
- 78% interest in Dairy Farm International Holdings Ltd (SGX: D01)
- 78% interest in Mandarin Oriental International Limited (SGX: M04)
- 75% interest in Jardine Cycle & Carriage Ltd (SGX: C07)
- 50% interest in Astra International (owned through Jardine Cycle & Carriage)
Shareholders of Jardine Matheson and Jardine Strategic, therefore, will have exposure to a wide range of business activities, which is akin to buying a basket of diversified stocks.
Over the last five years, Jardine Matheson has grown its profit attributable to shareholders from US$1.6 billion in 2013 to US$3.8 billion in 2017. Consequently, the group’s dividend per share has increased from US$1.40 to US$1.60. That translates to a compounded growth of 2.7%. As of 2017, the group’s dividend payout ratio stood at a comfortable 38%, giving it headroom to grow its dividend in the future too.
At the time of writing, Jardine Matheson had a share price of US$63.71, translating to a price-to-book ratio of 0.8, a price-to earnings multiple of 15.4 and a dividend yield of 2.5%.
ComfortDelGro Corporation Ltd (SGX: C52), as most Singaporeans know, provides taxi services, car rental and leasing services. It also offers public and charter bus services.
In recent years, the taxi giant has been facing disruption due to the emergence of ride sharing apps such as Grab and Uber. This, in turn, has led to a drop in revenue from S$4.05 billion in 2014 to S$3.97 billion in 2017.
Nevertheless, ComfortDelGro has still grown its dividends paid out to shareholders by increasing its payout ratio from 58.3% to 74.6% from 2014 to 2017. Consequently, dividends per share has risen from 8.3 Singapore cents in 2014 to 10.4 Singapore cents in 2017 even with stagnating profits.
ComfortDelGro, at its current price of S$2.35 per share, has an above-average trailing dividend yield of 4.4%, a price-to-book ratio of 1.9 and a price-to-earnings multiple of 17.9.
There are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on Singapore Exchange Limited, Hongkong Land Holdings Limited, Dairy Farm International Holdings Ltd and Mandarin Oriental Limited. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.