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If You Love Dividends, You Should Check Out These 3 Shares

“Ka-ching!”

That’s the sound of dividends rolling into your bank account.

If you love dividends, then you should pay attention to the following three dividend-paying companies. They have the potential to roll more dividends into your bank account for years to come.

Company #1

The first company to be featured is Micro-Mechanics (Holdings) Ltd (SGX: 5DD). The company produces consumable parts that are needed in the assembling and testing of semiconductors.

Micro-Mechanics has increased its total dividend by 1,150% from S$0.008 per share in FY2003 (financial year ended 30 June 2003) to S$0.10 per share in FY2018. The company’s dividend in FY2018 was 81% of its earnings in the year. To know more about the company’s dividends, you can check out a guide here.

Micro-Mechanics could face short-term headwinds, but its long-term prospects look bright. The company shared the following in its latest earnings update:

“As such cyclicality is typical for the semiconductor industry, we prefer to focus on the industry’s long term trends and try not to get side-tracked by short-term variations. We continue to believe the semiconductor industry is poised for a prolonged period of solid growth as chips are becoming increasingly embedded in nearly every aspect of modern life, from today’s smart phones to tomorrow’s driverless cars. Hence, the key to the Group’s success lies in our continuing ability to seize long-term opportunities and correctly identify the initiatives and investments that bring value to our customers.”

If the company can grow its earnings consistently in the future like how it has done in the past, investors should be rewarded with higher dividends in the years ahead. At Micro-Mechanics’ share price of S$1.67 right now, it has a tasty trailing dividend yield of 6%, including a special dividend of S$0.01 declared in the fourth quarter of FY2018.

Company #2

The next company in line is SATS Ltd (SGX: S58), a provider of food solutions and gateway services. The company serves mainly the aviation industry.

Over its past five fiscal years from FY13/14 (fiscal year ended 31 March 2014) to FY17/18, SATS’ dividend has climbed from S$0.13 per share to S$0.18 per share, giving an annualised growth rate of 8.5%. The company’s dividend is also well-covered. For example, in FY17/18, the payout ratio (dividend per share as a percentage of earnings per share) was just 76.9%. SATS’ conservative dividend payout ratio, coupled with the favourable tailwinds its businesses enjoy, should allow the company to sustain its dividend in the future.

The following chart shows SATS’ dividend payout in recent history:


Source: SATS FY217/18 earnings presentation

SATS’ share price of S$4.61 currently gives it a trailing dividend yield of 3.9%.

Company #3

The third company on the list is SBS Transit Ltd (SGX: S61), which provides public bus and rail services in Singapore.

SBS Transit has grown its dividend by 43.4% annually from S$0.018 per share in 2013 to S$0.076 per share in 2017, as shown in the following chart:


Source: SBS Transit 2017 annual report

Can SBS Transit keep its dividend growth streak going? I think so. The company only paid out 50% of its earnings as a dividend in 2017. Also, with the recent transitions to the Bus Contracting Model and New Rail Financing Framework, SBS Transit should be able to generate higher free cash flows in the future to sustain even higher dividend payments. As a case in point, in 2018’s second-quarter, SBS Transit hiked its interim dividend by an impressive 59% year-on-year to S$0.058.

SBS Transit’s share price is currently at S$2.70, which gives the company a trailing dividend yield of 3.6%.

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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 Micro-Mechanics, SATS and SBS Transit. Motley Fool Singapore contributor Sudhan P owns shares in Micro-Mechanics, SATS and SBS Transit.