Dividend investors generally invest in well-known blue-chip companies since these companies tend to pay consistent dividends over a long period of time.
Yet, those who are willing to explore beyond their comfort zone might occasionally bump into smaller companies that have the potential to sustain, as well as grow, their dividends over time. Though these types of investments are rare, they can be quite profitable to invest in when the opportunity presents itself.
In this article, I’ll look at one of these rare breeds that has grown its dividend by 400% in the last decade.
The company I’m talking about is Micro-Mechanics (Holdings) Ltd (SGX: 5DD). For starters, Micro-Mechanics designs, manufactures, and markets high precision parts and tools that are used in the semiconductor industry.
Now let’s look at Micro-Mechanics’ dividend per share (DPS) over the last decade:
Source: Micro-Mechanics’ Annual Reports
From the above, we can see that Micro-Mechanics has grown its DPS from 2 cents in FY09 to 10 cents in FY18. In other words, DPS grew fivefold in the last decade. Moreover, its DPS is either maintained or grew over the period (no year-on-year decline in DPS in any single year)!
Personally, I think that’s a solid track record!
Such performance can only come from sustainable growth in Micro-Mechanics’ underlying profitability. Let’s look at its financial numbers below.
In the last decade, Micro-Mechanics has grown its revenue from S$33.1 million in FY09 to S$65.1 million in FY18. Similarly, its net profit grew from S$0.5 million to S$17.1 million during that period. The former was up by 97% while the latter surged 3,320%!
Such strong growth in underlying performance (notably net profit) was the main reason that Micro-Mechanics was able to consistently grow its DPS over the years.
Micro-Mechanics has demonstrated solid performance in the last decade by growing its business, as well as dividends.
Going forward, the group is well-positioned to continue its trajectory given its exposure to the semiconductor industry.
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 the stock of Micro-Mechanics (Holdings) Ltd.