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The Top 5 Small Cap Dividend Stocks

The FTSE ST Small Cap Index is a common barometer of how the small cap companies in Singapore are doing. It comprises of 65 constituent stocks and REITs, and includes companies from manufacturing, healthcare, energy and real estate.

A recent report by the Singapore Exchange highlighted five of the highest yielding stocks in that index, excluding REITs. The top five stocks had a dividend yield of between 5% and 10.6%, and an average yield of 6.2%. Here’s a list of those top five stocks, starting from the bottom.

Hi-P International Ltd (SGX: H17) is fifth on the list with a dividend yield of 5%. It is an integrated contract manufacturer that serves a wide range of industries, including consumer electronics, and medical, industrial, among others. The group divides its business into three main segments, namely, mould design and fabrication, provision of sub-product assembly, and full-product assembly.

As is with most manufacturing companies in Singapore, the company reported a good year in 2017, with revenue up 9.3% and earnings per share more than doubling to 15.05 Singapore cents from 6.69 Singapore cents. However, the recent fears of a trade war has lead the company’s stock to nose-dive 53%. It now trades at S$1.27 per share, giving it a price-to-earnings ratio of 8.1 and a price-to-book ratio of 1.8.

Valuetronics comes in second with a yield of 5.5%. Like Hi-P, Valuetronics operates in the manufacturing industry. It is based in Hong Kong and provides a range of electronics manufacturing services, including the production of automobile parts and LED lights.

The company reported growth in all key areas of its business between FY2013 and FY2018, including revenue, gross profit and net margin increases. Just like Hi-P, its share price has been hammered down by market participants due to fears of trade war. At the time of writing, shares exchanged hands at S$0.69 per piece, which equates to a price-to-book ratio of 1.6 and a price-to-earnings multiple of 8.1.

UMS Holdings Limited (SGX: 558), yet another manufacturing company, is third with a yield of 5.6%. It specialises in the semiconductor manufacturing by providing high precision front-end semiconductor components.

UMS had a good 2017 as its revenue spiked 55% and earnings per share more than doubled. Despite a contraction in revenue in the first quarter of 2018, UMS posted higher profit attributable to shareholders due to better gross margins and lower tax expense. At the time of writing, shares of the company are trading at S$0.855 per piece. This translates to a price-to-book ratio of 2.0 and a  price-to-earnings multiple of 8.7.

QAF Limited (SGX:Q01) comes in second with a dividend yield of 5.8%. The company is involved in the baking and distribution of bread and bakery products. Most people in Singapore will be familiar with its branded packaged breads, “Gardenia” and “Bonjour”, which can be found in most supermarkets in Singapore.

Over the past five years, QAF has faced challenges in its business, resulting in revenue declining to S$848.5 million in FY2017 from S$1.03 billion in FY2013. Shares of QAF currently trade at S$0.865, giving it a price-to-book ratio of 0.92 and a price-to-earnings ratio of 24.5.

Duty Free International Limited (SGX:5SO) completes the list of five with a dividend yield of 10.58%. As its name suggests, the company is involved in wholesale, distribution and retailing of duty-free and non-dutiable merchandise. It operates around 40 duty-free outlets in various airports and seaports.

Due to a shortage of supply of popular products, the company’s revenue for the three months ended 31 May 2018 decreased 28.9%. Its shares are going at S$0.215 per share, giving a price-to-book ratio of 1.3 and a price-to-earnings multiple of 21.9.

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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 recommended shares of Singapore Exchange. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.