Investors are constantly seeking great investment ideas. These may come in the form of growth, dividends, or a combination of both. Companies that pay out dependable dividends act as a boon to the passive income of income-driven investors or retirees. Income investors can add another layer of cash inflow to their salaries, while retirees are able to rely on dividends to fund their golden years.
While most investors are hungry for dividends, the important thing is not just to look at the headline dividend yield, but to ascertain if the dividends are sustainable moving forward. Another aspect to watch out for is the frequency of dividend payments — a company that pays out more regularly would provide the investor with more predictable cash flow.
With all of the dividend criteria listed above — a high dividend yield and sustainable dividends with high frequency — here are three companies investors should definitely check out.
No. 1: VICOM Limited
VICOM Limited (SGX: V01) provides testing and inspection services. The group has two key divisions, vehicular inspection and non-vehicle inspections, and for its vehicular division, it holds the lion’s share of the market at more than 75% market share.
VICOM pays a high dividend yield of 5.3% twice yearly, which rises to 6.6% if you factor in its special dividend from FY 2018. The group generates consistent and healthy amounts of free cash flow in excess of what it requires, so current dividends seem sustainable. The business is also improving, with a 4.8% year-on-year growth in net profit for the first quarter of 2019, which would eventually translate into better cash flow.
No. 2: DBS Group Holdings Ltd
DBS Group Holdings Ltd (SGX: D05) is one of Singapore’s three big banks, and the group offers a comprehensive range of banking services from deposits to loans and asset management. The bank has been steadily growing its loan book over the years and is tapping on the growth of wealthy individuals in the region.
DBS recently announced that it will start paying a quarterly dividend (a change from half-yearly) of S$0.30, which will be helpful for investors who desire a more regular source of income. The annual dividend is expected to be S$1.20, and the historical dividend yield is around 4.6%.
No. 3: Singapore Exchange Limited
Singapore Exchange Limited (SGX: S68), or SGX, is Singapore’s sole stock exchange, and the group provides a platform for the trading of securities such as equities, fixed income, and derivatives. SGX has been growing its derivatives division by introducing different types of financial products for investors to hedge their exposure and mitigate risks.
SGX’s policy is to pay a quarterly dividend of 7.5 Singapore cents, and with its derivatives division showing good potential, I believe this level of dividends should be sustainable. The annual dividend of S$0.30 represents a historical dividend yield of around 3.8%.
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 VICOM Limited, DBS Group Holdings Ltd, and Singapore Exchange Limited. Motley Fool Singapore contributor Royston Yang owns shares in VICOM Limited and Singapore Exchange Limited.