Singapore Telecommunications Limited (SGX: Z74), or Singtel for short, is one of the largest listed companies in Singapore in terms of market capitalisation. It also possesses a market-beating dividend yield of more than 4%.
In this article, let’s learn more about Singtel’s dividend such as its dividend yield, dividend history and most importantly, its dividend sustainability.
At the closing price of S$3.19 yesterday, Singtel had a dividend yield of 5.5%.
For perspective, the SPDR STI ETF (SGX: ES3) had a distribution yield of 3.5% on the same day. The SPDR STI ETF is an exchange-traded fund (ETF) that tracks the fundamentals of Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI). Singtel is one of the 30 constituents of the index.
Dividend amount and payout periods
Singtel paid out a total ordinary dividend of 17.5 Singapore cents per share for its fiscal year ended 31 March 2018.
The dividend is usually split into two parts – one part (interim dividend) is given out for the second quarter and the other for the fourth quarter (final dividend).
In 2018, Singtel dished out 6.8 cents as an interim dividend and 10.7 cents as a final dividend. The amounts exclude any special dividend.
The following chart shows Singtel’s dividend history from 2014 to 2018:Source: Singtel 2018 annual report
Singtel’s total ordinary dividend had increased from 16.8 Singapore cents per share in 2014 to 17.5 cents in 2018.
The telco paid a special dividend of 3.0 cents in the last financial year from its NetLink Trust divestment proceeds.
Singtel is committed to paying dividends that increase over time as its underlying earnings grow.
The pricing pressure in India may impact Airtel’s profit contribution in the short-term. However, the impact on Singtel’s cash flow and therefore, dividend payment, is not expected to be significant, according to the company. Singtel owns 39.5% of the Airtel.
In its 2018 annual report, Singtel mentioned that it “expects to maintain its ordinary dividends at 17.5 cents per share for the next two financial years and thereafter revert to the payout ratio of between 60% to 75% of its underlying net profit”.
To find out if a company’s dividends are sustainable, we can compare its free cash flow to the amount in dividends that it pays out. Companies which pay less than 100% of their free cash flow have some room for error and have space for dividend growth in the future.
The following shows Singtel’s free cash flow, total dividend paid, and dividend payout ratio (dividend as a percentage of net profit) since 2014:Source: S&P Global Market Intelligence
Singtel’s dividends look sustainable as the telco pays out less than 100% of its earnings and free cash flow as dividends.
Dividend yield history
The following chart shows Singtel’s dividend yield for the past 20 years, from June 1998 to mid-August 2018:Source: S&P Global Market Intelligence
Singtel’s dividend yield had increased from around 2% in 1998 to more than 5% currently. Its dividend yield now is also higher than that of during the depths of the Great Financial Crisis in 2009.
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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 Sudhan P doesn’t own shares in any companies mentioned.