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The Top 5 Billion-Dollar Stocks in Singapore with the Highest Dividend Yields and Good Returns on Equity

Yesterday, the Singapore Exchange released a report highlighting stocks that have market capitalisation of more than S$1 billion and a return on equity (ROE) of above 10%. The ROE figure reveals how efficient a company’s management is in turning every dollar of shareholders’ capital into profits. ROE can also be artificially inflated by taking on more debt. Therefore, investors who come across companies with high ROEs should not take the figure at face value.

Of the 32 companies shown in the report, I ranked the companies according to their dividend yields, and they are shown below. The market capitalisation-weighted average dividend yield and ROE of the 32 companies are 3.8% and 14.1% respectively. All figures are as of 17 August 2018.

Best of the lot

Taking the top three spots are the major telcos in Singapore. The highest dividend-yielding among them is StarHub Ltd (SGX: CC3), with a dividend yield of 9.6%. According to the report, StarHub has an ROE of 44.6% and a one-year total return of negative 30.2%. We recently featured a go-to guide on StarHub’s dividends, and it can be found here. The guide also includes an informative chart on StarHub’s historical dividend yield.

Coming in second is M1 Ltd (SGX: B2F). It has a dividend yield of 7.2% and an ROE of 29.1%. Singapore Telecommunications Limited (SGX: Z74), or Singtel for short, slots into the third spot with a yield of 5.6%. Of the trio, it looks to me like Singtel’s dividends are the most sustainable.

For a head-to-head comparison of the dividend sustainability of the telcos, you can check out the following links:

a) For Singtel’s and StarHub’s dividends – head here

b) For Singtel’s and M1’s dividends – head here

c) For StarHub’s and M1’s dividends – head here

Ascendas India Trust (SGX: CY6U) clinches the fourth spot. The trust invests mostly in business spaces in India and sports a distribution yield of 5.3%. Ascendas India Trust has a one-year total return of 6.2% and a price-to-book (PB) ratio of 1.3. You can know more about the trust here.

Last but not the least, DBS Group Holdings Ltd (SGX: D05) takes the final spot. The bank has a dividend yield of 4.8% and a one-year total return of an impressive 30.9%. At the closing price of S$25.09 on 17 August, it had a PB ratio of 1.4. In early-August, DBS announced its financial results for the second quarter ended 30 June 2018 where the interim dividend was hiked to 60 cents per share from 33 cents per share one year ago. During the announcement, the bank’s chief executive, Piyush Gupta, also highlighted four macroeconomic uncertainties that investors should be aware of. Jump in here to find out what the boss said.

The Foolish takeaway

Stocks with high dividend yields may not always be great investments. As Foolish investors, we have to look for companies that can grow, or at least sustain, their dividends year-after-year. The list above can serve as a starting point for your further research.

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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 and DBS Group Holdings Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange.