Every investor loves to receive dividends, and the hunt is always on for companies that are able to raise their dividend payouts over time. Of course, investors need to ensure that a dividend increase is sustainable, and that the company’s business is growing and performing well, so they have the assurance that the dividend can be maintained, or even increased.
Here are three companies that have increased their dividend payments recently, and they are all backed by robust business models and excess free cash flow.
SATS Ltd (SGX: S58) provides gateway services and food solutions, mainly to the aviation industry. The group is now present in 60 locations across 13 countries in Asia and the Middle East.
The group recently announced its full-year 2019 earnings (for the period ended 31 March 2019) and proposed a final dividend of 13 Singapore cents per share. This was 1 Singapore cent higher than the dividend declared and paid out last year of 12 Singapore cents per share. SATS’s full-year dividend stood at 19 Singapore cents, which translated to a dividend yield of 3.8% at the last traded share price of S$5.04.
SATS’s dividend increase is backed by stronger profit after tax and also increased free-cash-flow generation. Its balance sheet also has a strong net cash balance of S$254.5 million.
Raffles Medical Group Ltd
Raffles Medical Group Ltd (SGX: BSL), or RMG, is a healthcare company that owns a string of clinics in Singapore and Asia. The group also operates a hospital in Singapore, Raffles Hospital, and two hospitals in China, of which one is currently under construction.
RMG paid out a total dividend of 2.5 Singapore cents for fiscal year 2018, and this was 11.1% higher than the total dividend of 2.25 Singapore cents in the previous year. RMG’s historical dividend yield was 2.4% based on its last traded price of S$1.03.
The bulk of RMG’s capital expenditure (capex) is for its new hospital under construction in Pudong, Shanghai. The group just completed construction of its new hospital in Chongqing and began operations in January 2019. Operating cash flow remains strong for the group at S$21.7 million in 1Q 2019, and for all of 2018, S$91.5 million of operating cash flow was generated. In spite of the group’s heavier capex commitments, the fact that management still declared higher dividends seems to demonstrate its confidence in the company’s new hospitals.
Straco Corporation Limited
Straco Corporation Limited (SGX: S85) is a tourism asset operator that owns two aquarium attractions in Shanghai and Xiamen in China, 90% of the Singapore Flyer, as well as Lixing Cable Car and Chao Yuan Ge in Xi’An, China.
For the 2018 fiscal year, Straco paid out a final dividend of 2.5 Singapore cents and added a sweetener by declaring an additional special dividend of 1 Singapore cent, taking total dividends for the year to 3.5 Singapore cents per share. For the last two fiscal years, 2016 and 2017, the group kept its annual dividend at 2.5 Singapore cents per share. At the last traded share price of S$0.74, this represents a historical dividend yield of 4.7%.
Based on the issued share capital of 860.6 million shares, Straco will be paying out a total dividend of S$30.1 million. Note that in a typical year, Straco generates around S$60 million in free cash flow, which is able to more than support this increased dividend payout. Also, the first-quarter 2019 balance sheet shows a strong net cash position of S$174.9 million (or S$0.20 per share in net cash), signaling that the group is in excellent shape to pay out this higher dividend in the years to come.
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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 Royston Yang owns shares in SATS Ltd, Raffles Medical Group Ltd, and Straco Corporation Limited. The Motley Fool Singapore has recommended shares of SATS Ltd, Raffles Medical Group Ltd, and Straco Corporation Limited.