The Motley Fool

Your Complete Singapore Exchange Limited Dividend Guide

Singapore Exchange Limited (SGX: S68), or SGX for short, is the only stock market operator in Singapore. The company currently offers a juicy dividend yield that is higher than what’s offered by the market. In this article, let’s learn more about SGX’s dividend, including areas such as its dividend yield, dividend history, and most importantly, the sustainability of the company’s dividend.

Dividend yield

On 2 October 2018, SGX’s share price closed at S$7.33, translating to a dividend yield of 4.1%.

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). SGX is one of the 30 constituents of the index.

Dividend amount and payout periods

SGX paid out a dividend of S$0.30 per share for its fiscal year ended 30 June 2018 (FY2018). The company’s annual dividend is split into four parts, with a certain amount paid every quarter. In FY2018, SGX dished out a dividend of S$0.05 per share each in the first, second, and third quarters; the fourth quarter saw a dividend of S$0.15 per share.

Dividend history

The following chart shows SGX’s dividend history from FY2014 to FY2018:
Source: Singapore Exchange FY2018 earnings presentation

SGX’s dividend climbed from S$0.28 per share in FY2014 to S$0.30 per share in FY2018. The increase translates to an annual growth rate of 1.7%.

Dividend guidance

In the first quarter of FY2019, SGX started a dividend policy of paying a dividend of S$0.075 per share per quarter, which equates to a total annual dividend of S$0.30 per share. This marks an increase of S$0.025 per share, or 50%, for the quarterly dividend amount, and shareholders are able to receive their dividends earlier in the financial year, compared to the past.

The chart below illustrates how SGX’s dividend payout increase would look like in the first quarter of FY2019:
Source: Singapore Exchange FY2018 AGM presentation

Dividend sustainability

To find out if a company’s dividends are sustainable, we can compare its free cash flow to the dividend that it pays. A company which pays less than 100% of its free cash flow has some room for error and has space to grow its dividend in the future.

The following table shows SGX’s free cash flow, total dividend paid, and dividend payout ratio (dividend as a percentage of net profit) since FY2014:
Source: S&P Global Market Intelligence

SGX’s dividend looks sustainable to me as the company pays out less than 100% of its earnings and free cash flow as a dividend.

Dividend yield history

The following chart shows SGX’s dividend yield from January 2014 to early-October 2018:Source: S&P Global Market Intelligence

You can see that SGX’s current dividend yield of 4.1% is on the upper-end of the company’s dividend yield range for the past four years or so. The high dividend yield can be enticing for income investors.

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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 Limited. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange Limited.