When screening for great shares to buy, a reliable indicator of improved business performance usually comes in the form of a company’s dividend increase. When companies hike their dividend, they are signalling to the market that their business is performing well and that they are confident of having the cash flow to pay for the higher dividend.
Investors may think that blue-chip companies may not have much room for dividend growth as they are already large and that size itself may be a limiting factor in how much more they can grow. However, I have found this to be untrue as the more important metric is to look at the growth plans put in place by the company. And if the company is a major player within the market, then there is definitely room for further growth.
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Keeping that in mind, here are three Singapore blue-chip companies that recently reported year-on-year growth in dividends.
1. Oversea-Chinese Banking Corporation Limited
Oversea-Chinese Banking Corporation Limited (SGX: O39), or OCBC, is one of Singapore’s three big banks. The group offers a comprehensive range of banking services for individuals, SMEs, and large corporations.
In its latest Q2 2019 and H1 2019 earnings, the bank reported a 10% year-on-year increase in total income, while operating and net profit increased by 11% and 6% year-on-year respectively.
Net interest margin also rose 12 basis points (i.e. 0.12%) to 1.79% from 1.67% in Q2 2019. As a result of this improved performance, OCBC hiked its interim dividend by 25% from 20 Singapore cents to 25 Singapore cents.
2. ComfortDelGro Corporation Ltd
ComfortDelGro Corporation Ltd (SGX: C52), or CDG, is a land transport conglomerate with a total fleet size of about 42,300 buses, taxis, and rental vehicles. CDG operates in seven countries – Singapore, Australia, the UK, China, Ireland, Vietnam, and Malaysia.
For H1 2019, CDG reported a 5.9% year-on-year increase in revenue and a 3.5% year-on-year increase in net profit. The group continued to generate healthy free cash flow of about S$87.2 million for H1 2019 and increased its interim dividend from 4.35 Singapore cents to 4.5 Singapore cents (an increase of 3.4% year-on-year).
3. SATS Ltd
SATS Ltd (SGX: S58) is a provider of both gateway services for airlines and food solutions. Gateway services encompass airfreight handling, passenger services, and aviation security services, while food solutions include airline catering, aviation laundry, and food distribution-cum-logistics. The group is present in over 60 locations in 13 countries across Asia and the Middle East.
For its FY 2019 earnings (the group has a 31 March year-end), SATS reported a 6% year-on-year increase in revenue and a 2.2% year-on-year increase in underlying net profit (excluding one-off items).
Free cash flow continues to be strong at over S$200 million for the fiscal year. SATS increased its final dividend from 12 Singapore cents to 13 Singapore cents, taking its full-year 2019 dividend to a total of 19 Singapore cents.
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 Oversea-Chinese Banking Corporation Ltd and SATS Ltd. Motley Fool Singapore contributor Royston Yang owns shares in SATS Ltd.