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This Singapore Company Increased Its Dividend by 461% in the Last 5 Years

SBS Transit Ltd (SGX: S61), a provider of bus and rail services to the Singapore public, has rewarded its shareholders handsomely with consistently increasing dividends. From 2014 to 2018, the Singapore-listed firm increased its dividend by a whopping rate of 54% per annum, or 461% in total. According to the company’s 2018 annual report, SBS Transit is the largest public bus operator in Singapore with a market share of 61.2%.

Dividend machine

The below illustrates how SBS Transit has grown its dividend over the past five years.

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Source: SBS Transit 2018 annual report

SBS Transit’s shareholders received a total dividend of 2.30 Singapore cents for 2014. Four years later, the company’s total dividend grew to 12.90 Singapore cents, crushing the average inflation rate in Singapore by some margin. So, what’s behind the massive growth in SBS Transit’s dividend?

Steady growth in business

The company’s consistent track record of growing its business steadily over the years is the main reason for the higher total dividend.

Source: SBS Transit 2018 annual report

SBS Transit’s revenue advanced 9.8% annually, from S$951.0 million in 2014 to S$1.38 billion in 2018. Together with the higher revenue, net profit surged 53.8% yearly, from S$14.3 million in 2014 to S$80.1 million in 2018. Most of the net profit growth can be attributed to SBS Transit’s transition to the Bus Contracting Model (BCM) on 1 September 2016.

The higher earnings allowed SBS Transit to up its dividend by 53.9% annually from 2014 to 2018.

Can SBS Transit’s dividends improve further in 2019 and beyond?

I believe there is still room for further dividend hikes at the land transport outfit.

The 2018 dividend of 12.90 Singapore cents translates to a dividend payout of just 50.2%. In terms of free cash flow, the latest dividend is merely 30.7% of 2018’s free cash flow per share. These two metrics are conservative in my opinion. You can check out my in-depth analysis of the company’s potential dividend hike here.

At SBS Transit’s current share price of S$3.97, it has a dividend yield of 3.2%.

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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 SBS Transit Ltd. Motley Fool Singapore contributor Sudhan P owns shares in SBS Transit Ltd.