Nordic Group Ltd (SGX: MR7) and Boustead Singapore Limited (SGX: F9D) both operate in the oil and gas industry, among others. The two companies also offer similar dividend yields of close to 4%. However, which of the two gives investors better value in terms of their dividends? To determine that, let’s compare the dividend yields, dividend historical growth rates, and dividend payout ratios of the two companies.
Nordic’s share price is at S$0.30 currently. At that share price, Nordic has a trailing dividend yield of 3.77%. Meanwhile, at Boustead Singapore’s current share price of S$0.785, it has a trailing dividend yield of 3.82%.
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Therefore, comparing dividend yield alone, Boustead Singapore has a slight edge over Nordic.
Dividend growth rate
The dividend yield tells us what a company has paid over the last 12 months, and it is useful information. However, we should also be looking at how the company’s dividend has changed over time, preferably over the last five fiscal years or more.
Nordic’s ordinary dividend per share has grown from 0.25 Singapore cents in FY2014 (the company has a 31 December year-end) to 1.1320 Singapore cents in FY2018. For its fiscal year FY2014, it also paid a 0.25 Singapore cents per share special dividend.
As for Boustead Singapore, its ordinary dividend has fallen from 4.0 Singapore cents per share in the financial year ended 31 March 2015 (FY2015) to 3.0 Singapore cents in FY2019.
In terms of dividend growth, Nordic has the upper hand over Boustead Singapore with its growing dividend payment.
Dividend payout ratio
Beyond the trailing dividend yield, we should also assess whether a company can maintain or grow its current dividend in the future. To do that, we can compare the company’s dividend payout ratio (the dividend as a percentage of earnings).
In the FY2018, Nordic had 2.9 Singapore cents in earnings per share. Since it paid out 1.132 Singapore cents in dividends per share for the year, it had a dividend payout ratio of 39%.
In comparison, Boustead Singapore’s dividend payout ratio was 45%, given its earnings per share of 6.6 Singapore cents and dividend per share of 3.0 cents in FY2019.
Since Nordic has a lower dividend payout ratio than Boustead Singapore, Nordic is the safer dividend share.
The Foolish conclusion
Even though Boustead Singapore has a dividend yield that is a tad higher than Nordic’s, Nordic seems to be the more sustainable dividend share with growing dividends and the more conservative dividend payout ratio.
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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 Nordic Group Ltd and Boustead Singapore Limited. Motley Fool Singapore contributor Sudhan P owns shares in Boustead Singapore Limited.