VICOM Limited (SGX: V01) is a leading provider of technical testing and inspection services with operations primarily in Singapore. The company is majority-owned by land-transport giant ComfortDelGro Corporation Ltd (SGX: C52).
Here at the Fool, we generally look at investments in three buckets; namely growth, value and income/dividend since investors will have different preferences and styles.
In this article, I’ll look at two reasons why VICOM might be of interest to one of these groups of investors – dividend investors.
One of the key criteria that investors look for when investing in a company is the track record of dividend payment. The key here is to look for stable, or even better, increasing dividend payment over the years.
In the case of VICOM, it has grown its dividend per share from 27 cents in 2014 to 45.25 cents in 2018. In other words, its dividend was up by 68% during the period.
The past is no guarantee of the future, of course. Yet, VICOM’s track record of growing its dividend payment gives us some confidence that it will maintain a similar dividend policy in the future, so long as it can maintain its profitability. Still, investors should carry out research to understand the underlying economics of VICOM’s business before coming to a conclusion.
Solid balance sheet
Another thing to like about VICOM from the perspective of dividend investing is its strong balance sheet. Let’s look at some numbers.
As of 30 June 2018, VICOM had S$89.0 million in cash and cash equivalents and S$34.1 million in lease liabilities. This gives it a net cash position of S$54.9 million.
From the above, we can see that VICOM has a strong balance sheet. Here, the idea is simple. Dividends are paid out to investors in the form of cash. The cash, in turn, is generally derived from one of the following sources: 1) existing cash balance 2) profits or 3) new borrowings.
In other words, a company must have enough cash on hand, or at least have the ability to borrow money (if necessary but preferably not), to pay its dividend. In the case of VICOM, it’s well-positioned (in terms of its balance sheet) to continue paying dividends for the foreseeable future.
Overall, given the current state of volatile markets and how much dividends contribute to the long-term returns of stocks, dividend investors might want to have a look at VICOM. Its solid dividend track record and strong balance sheet should give investors confidence that it can meet investor expectations regarding its dividend.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended shares of VICOM Limited.