Semiconductor is a cyclical industry that is currently going through a downturn. As such, we can see that companies exposed to this industry were hit, both in term of profitability and share price.
The good news is that it might be a good time now to consider some of these stocks. In this article, I’ll compare two companies that might be good candidates for dividend investors – Venture Corporation Ltd (SGX: V03) and Micro-Mechanics (Holdings) Ltd (SGX: 5DD).
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We are going to put the duo through two simple tests to decide which one might be a better dividend stock to consider now.
Financial track record
To start with, we will compare the financial performance of both companies in the last decade. This will help us assess the sustainability of the companies’ performance in the future. Also, we can find out which company had the better growth rate over this period.
With that, let’s look at some numbers. We will start with Venture Corporation. From 2008 to 2018, Venture’s revenue declined from S$3.8 billion to S$3.5 billion in 2018. Yet, net profit attributable to shareholders grew from S$167 million in 2008 to S$370 million in 2018. Though the former was down by about 8%, the latter jumped 122% during that period.
And now Micro-Mechanics. During the same period period, its revenue grew from S$38 million in 2008 to S$65 million in 2018. Similarly, net profit attributable to shareholders grew from S$9 million in 2008 to S$17 million in 2018. The former was up by 71% while the latter improved by 89% during that period.
Both companies did reasonably well in improving their profits during the period. Comparatively, I like Micro-Mechanics’ performance a little better since it grew both its top and bottom line over the period.
Dividend track record
The next comparison that we have here is to compare the dividend track record for the last 10 years. This will give us some indication of what we should expect in the future.
Let’s begin with Venture. In the last decade, Venture has grown its dividend per share from S$0.50 in 2008 to S$0.70 in 2018. In other words, its dividend was up by 40% during the period.
And now for Micro-Mechanics, it has grown its dividend per share from 5 cents in 2008 to 10 cents in 2018. In other words, its dividend was up by 100% during the period.
As we can see, both companies did reasonably well by sustaining, as well as growing their dividends over the decade. Again, Micro-Mechanics came out stronger with better dividend growth over last decade.
Overall, we think Micro-Mechanics might be a better dividend stock now given its stronger financial and dividend track record.
Still, investors should be reminded that the above looks mainly at past performance. Thus, investors should also consider the future prospects of both companies before investing their money.
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 Micro-Mechanics (Holdings) Ltd.