The Motley Fool

Ask the Fools: Favourite Dividend Shares

We asked the Fools for their favourite Singapore dividend shares. Here’s what they picked.


Chin Hui Leong: VICOM Limited

VICOM Limited (SGX: V01), which offers a dividend yield of 5.2% (excluding special dividends) today, is my top dividend share.

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The business of VICOM is straight forward. The company provides vehicle inspection services and other test and inspection services under its wholly owned subsidiary SESTCO.

Vehicles in Singapore have to undergo mandatory inspections for them to be still roadworthy. The business characteristic provides VICOM with a reliable stream of revenue and profits. Together with its ability to generate strong free cash flow and a clean balance sheet, VICOM has all the right ingredients to be a solid dividend payer. And rightly so.

Total dividend (which includes special dividend) from VICOM has grown from S$0.27 per share in 2014 to S$0.4525 per share in 2018.

However, there are some risks for VICOM that are worth watching. Firstly, its dividend payout ratio has been above 100% for the last two fiscal years, if we include special dividends. Secondly, there can only be a finite number of cars on Singapore’s roads and that could put a cap on the amount of growth left at VICOM. Despite the risks — and which business doesn’t come with risks? — VICOM is a keeper in my dividend portfolio.

Chin Hui Leong owns shares in VICOM Limited.


Chong Ser Jing: DBS Group Holdings Ltd

Singapore banking giant, DBS Group Holdings Ltd (SGX: D05), recently changed its frequency of paying a dividend, from half-year to quarterly. This means investors in the bank can get to enjoy more regular dividend cheques. But that’s not what makes DBS one of my favourite dividend shares this month – it’s the many attractive traits I see.

High dividend yield: At a share price of S$26.06 as of 10 July 2019, DBS has an annualised dividend yield of 4.6%, based on its S$0.30 per share dividend for 2019’s first quarter, which works out to S$1.20 per share per year – the same as the annual dividend for 2018.

Low payout ratio: DBS’s annualised dividend of S$1.20 per share is just 46.5% of its annualised earnings for 2019’s first quarter; the low payout ratio is a sign of a sustainable dividend.

Strong financial health: Singapore’s largest bank ended 2019’s first quarter with an assets-to-shareholders’ equity ratio of just 11.0, and a low loan-to-deposit ratio of 87.9%; the former indicates healthy leverage while the latter points to low liquidity risks.

Good current business results: In the first quarter of 2019, DBS’s total income (the bank’s revenue) increased by 5.7% from a year ago to S$3.55 billion, resulting in net profit growth of 9.3% to S$1.65 billion, and book value per share growth of 2.5% to S$18.75.

Potential for future growth: During DBS’s earnings presentation for 2019’s first quarter, management explained why the full beneficial impact of the numerous rate hikes by the Federal Reserve in the US since 2017, and higher interest rates in Singapore since 2018, has yet to appear in DBS’s results: Only around 45% of DBS’s loans are repriced immediately when interest rates rise, and there will be a time-lag for the rest of the bank’s loans to catch up.

Chong Ser Jing doesn’t own shares in DBS Group Holdings Ltd.


David Kuo: Jardine Matheson Holdings Limited

Jardine Matheson Holdings Limited (SGX: J36) is a complex amalgamation of apparently unrelated businesses. Its beauty is that its subsidiaries operate independently, even though the parent – because of its significant stake in each subsidiary – will probably want to have some say into how they should be run.

The businesses under Jardine Matheson operate in very different industries. Consequently, they are exposed to different economic cycles, which means that the risk of one industry doing badly could be offset by another that is performing well. It also means that Jardine Matheson could deploy cash generated from one part of the group to another that might generate a better return.

It’s like an ice cream seller who also sells umbrellas. The tills could ring, come rain or shine. Similarly, the Jardine Matheson’s dividend cheques could keep coming regardless of economic conditions.

Jardine Matheson retains around 80% of its profits for internal use. That is a lot of dry powder for a company that has delivered an average return on equity of 12% since the turn of the millennium. That return, coupled with Jardine Matheson’s high retention ratio, implies that it could grow its payout at around 10% a year.

It has achieved that with remarkable consistency. In 2001, its payout was S$0.49 per share. By 2018, the dividend per share was S$2.32. That’s an increase of 9.6% a year. Voila!

David Kuo owns shares in Jardine Matheson Holdings Limited.


Tim Phillips: Venture Corporation Ltd 

My choice would be Venture Corporation Ltd (SGX: V03), a hi-tech design and manufacturing firm involved in complex circuit boards and advanced industrial equipment. This might be seen as a rather unconventional dividend pick but let me explain why.

First off, the company’s free cash flow is nothing to sniff at – it generated just over S$100 million of it in Q1 2019 alone. Add to that its unbelievably strong balance sheet that has nearly no debt and boasts a net cash position of S$805 million as of 31 March 2019.

In 2018, for the first time ever it paid out an interim dividend per share (DPS) of $0.20 per share – to add to its usual final DPS of $0.50. Granted, its share price has been knocked back by trade war fears, but I feel this is overblown and given a payout ratio of only 55% last year, the company has the ammunition to raise its dividend and keep on paying well into the future.

At the moment, it’s trading at a trailing 12-month dividend yield of 4.5%, but with brokers’ price targets being cut, the contrarian in me likes this as a yield play for anyone thinking about dividend income for the long-term. 

Tim Phillips owns shares in Venture Corporation Ltd.


Sudhan P: Singapore Exchange Limited

I like Singapore’s only stock market operator, Singapore Exchange Limited (SGX: S68), or SGX for short. SGX sports a dividend yield of 3.8%, which is not too shabby, at its share price of S$7.99.

The company has been a great income share for long-term shareholders. From fiscal year ended 30 June 2001 (FY2001) to FY2018, SGX has rewarded shareholders well by growing its dividends from 5.5 Singapore cents per share to 30 cents, translating to an annualised increase of 10.5%.Source: Singapore Exchange investor relations website

From FY2019, SGX said that it will pay 7.5 cents per share per quarter. It aims to “pay a sustainable and growing dividend over time, consistent with the company’s long-term growth prospects”. I have a firm belief in SGX’s ability to steadily grow its earnings over the long-term, giving rise to increasing dividends for shareholders.

Sudhan P owns shares in Singapore Exchange Limited.

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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 recommendations on VICOM Limited, DBS Group Holdings Ltd and Singapore Exchange Limited.