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The Better Dividend Share: SBS Transit Ltd vs. VICOM Limited

Both SBS Transit Ltd (SGX: S61) and VICOM Limited (SGX: V01) are largely owned by land transport giant, ComfortDelGro Corporation Ltd (SGX: C52). Even though both SBS Transit and VICOM are involved in somewhat different business, both of them offer decent dividend yields. However, which could give dividend investors better value? Let’s explore this further.

Dividend yield

SBS Transit’s share price right now is at S$4.10, and that gives the company a trailing dividend yield of 3.5%. In comparison, at VICOM’s share price of S$7.13 currently, it has a trailing dividend yield of 5.2%, excluding any special dividend.

Therefore, in terms of dividend yield alone, VICOM triumphs over SBS Transit.

Dividend growth rate

The dividend yield tells us what a company has paid over the last 12 months. However, we should also be looking at how the company’s dividends have changed over time, preferably over the last five years or more.

Dividends at SBS Transit have grown at a compound annual growth rate (CAGR) of 53.9% while VICOM’s dividends have climbed at a CAGR of 20.3%, without any special dividends. Including special dividends, VICOM’s dividend CAGR drops to 13.8%.

The following shows SBS Transit’s and VICOM’s total dividend per ordinary share from 2014 to 2018 (purple chart belongs to SBS Transit and blue chart belongs to VICOM):Source: SBS Transit and VICOM 2018 annual reports

In terms of dividend growth over the past five years, SBS Transit has the upper hand over VICOM.

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 earnings to the amount in dividends that it pays out. Companies that have a dividend payout ratio of less than 100% show that there is some room for business slowdowns in the future.

In 2018, SBS Transit had a dividend payout ratio of just 50% while that of VICOM stood at 94%, excluding any special dividend. Including VICOM’s 2018 special dividend, the dividend payout ratio jumps to 116%.

In terms of payout ratio, SBS Transit’s dividend payment looks more sustainable than VICOM’s.

The Foolish takeaway

Even though VICOM’s dividend yield is much higher than SBS Transit’s, SBS Transit has a far superior dividend growth rate and lower dividend payout ratio than VICOM. Based on the factors above, I conclude that SBS Transit is the more attractive dividend share.

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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 SBS Transit Ltd and VICOM Limited. Motley Fool Singapore contributor Sudhan P owns shares in SBS Transit Ltd and VICOM Limited.