The Motley Fool

Should You Buy Singapore Airlines Shares?

Singapore Airlines Ltd (SGX: C6L), or SIA, is the national carrier for the city-state of Singapore and is famous for its “Singapore Girl” branding. Other than the namesake carrier which the airline runs, it also has other subsidiaries such as SilkAir, Scoot, and Vistara which serve different groups of customers in the area of passenger transportation.

Last week, I looked at whether CapitaLand Ltd (SGX: C31) should be in your portfolio. This time, I’ll take a look at three metrics to see if you should buy shares of SIA and whether it deserves a spot in your portfolio.

Earnings per share

Earnings per share (EPS) at SIA has compounded at an impressive 16.5% over the past five years. This is on the back of EPS growing from 31.4 Singapore cents in the financial year (FY) 2015 to 57.7 Singapore cents in FY 2019.

With such a strong growth rate despite the numerous headwinds the airline industry has faced for many years, it goes to show that Singapore Airlines knows its industry and its game.

Passenger load factor

Secondly, let’s try to understand if the growth registered by SIA is due to improved business decisions. The passenger load factor is one metric which is useful for this, as it tells us how efficient the transport provider is in filling up its seats. The higher the capacity of utilisation, the more revenue and profits the company generates.

For SIA, in the past five years, the company has managed to improve its passenger load factor from 78.5% to 83.1%. This goes to show that the company is indeed doing something right when it comes to filling up seats and bringing in more revenue and profits.

Dividend payout

Lastly, having seen that SIA grew its EPS and passenger load factor at a strong rate over the past five years, investors would wonder if they shared this fortune with them. On this front, SIA has boosted its dividend payout from 22 cents to 30 cents over the mentioned period.

This implies a CAGR of 8.1%. The modest increase in the dividend goes to show that SIA has its shareholders’ interests at heart. Despite the airline industry being a capital-intensive business, it has managed to increase its dividends and reward patient investors.

Foolish summary

To sum up, Singapore Airlines has registered strong growth in both its EPS and dividends over the past five years. Both these metrics are strongly supported by an increase in efficiency at the company as seen from an uptick in its passenger load factor.

It looks like SIA knows what it’s doing, but investors should still dig deeper to decide if it is a worthy addition to their portfolio.

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Motley Fool Singapore writer Esjay contributed to this article. Motley Fool Singapore contributor Esjay does not own shares in any companies mentioned.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool has recommended shares of CapitaLand Limited. Motley Fool Singapore contributor Tim Phillips does not own shares in any companies mentioned.