When investors search for good dividend stocks, they may have the impression that smaller companies can pay higher dividend yields, as large companies are normally so well-known that their share prices are bid up to levels where the dividend yield is compressed. However, the truth is, there are many large-cap companies with long histories and track records of paying steady and sustainable dividends.
Of course, investors may have different definitions as to what constitutes a “high dividend yield.” For blue-chip companies that are stalwarts in their own industries, a decent dividend yield would range from 3.5% to 5%. Remember that the idea is for the investor to beat long-term inflation, which falls in the range of 2% to 3%. With growth factored into each of these companies, there is also the potential for the dividend to be hiked in future years.
Here are three billion-dollar companies that fit the bill.
1. Singapore Technologies Engineering
Singapore Technologies Engineering Ltd (SGX: S63), or STE, is an engineering conglomerate with four key divisions: aerospace, marine, land systems, and electronics. STE is one of the largest companies listed on the SGX (with a market value of about S$12.5 billion) and one of Asia’s largest defence and engineering groups.
STE has stayed resilient through tough times and demonstrated decent growth during good times. It can be considered a stalwart engineering company that provides stability and peace of mind to investors. The group has paid out an annual dividend of 15 Singapore cents per share for the past five years. Based on the last traded price of S$4.17, STE is providing a trailing dividend yield of 3.6%.
2. DBS Group Holdings Ltd
If investors want exposure to Singapore’s economy, they need look no further than the three big banks. Of the three, DBS Group Holdings Ltd (SGX: D05) has increased its dividend payout the most aggressively in the last five years. With improving net interest margins, a 5% year-on-year increase in its loan book, and a sanguine outlook, investors can look to DBS for both growth and yield.
DBS, with a market capitalisation of S$65.2 billion, is one of Singapore’s largest companies. At DBS’s last traded share price of S$25.43, its trailing dividend yield stood at 4.7%.
3. Singapore Exchange Limited
Finally, investors who are looking for a piece of the action in the trading of equities, derivatives, and fixed-income securities should look for Singapore Exchange Limited (SGX: S68), or SGX. With a market value of S$7.9 billion, SGX ranks as one of the largest listed financial companies. It has a monopoly in being Singapore’s sole stock exchange, has a strong balance sheet with no debt, and generates copious amounts of free cash flow every year.
SGX has a policy of paying out dividends quarterly and is currently declaring 7.5 Singapore cents per quarter for an annual dividend of 30 Singapore cents. At SGX’s last traded price of S$7.76, its trailing dividend yield was 3.9%.
A wide selection for investors
The three companies above not only offer steady and dependable dividend yields of 3.5% to 5%, but they also cover a good range of industries (banking, financial services, and engineering). Being large and reputable has its advantages, as investors can sleep well knowing that these companies are professionally managed and have a strong competitive edge that will keep working to compound investors’ monies.
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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 the shares of DBS Group Holdings Ltd and Singapore Exchange Limited. Motley Fool Singapore contributor Royston Yang owns shares in Singapore Exchange Limited.