iFast Corporation Limited (SGX: AIY) is a financial technology company and offers investors the chance to buy and sell securities such as equities, unit trusts and bonds on its platform. iFast holds the requisite licences in the various jurisdictions in which it operates, and offers access to over 6,500 funds from over 250 fund houses. The group operates in Singapore, Malaysia, Hong Kong, China and India.
iFast has been growing steadily over the years, and recently, the group has announced its intention to pursue a digital banking licence in Singapore. Applications have been opened by the Monetary Authority of Singapore (MAS), and interested parties have until end 2019 to submit their applications.
The group also continually invests in its platform capabilities to enhance users’ experience and offer higher levels of functionality. Investors may wonder if iFast is still able to pay out a decent level of dividends. Here are three reasons why I believe iFast can still provide a safe and stable dividend.
Reason 1: Growing AUA
Source: iFast Corporation Limited’s Q2 2019 Presentation Slides
iFast has seen its assets under administration (AUA) rising to a record high of S$9.04 billion as of 30 June 2019. AUA provides a good indication of the level of revenue which iFast can earn as billings are made based on the level of assets parked with the group. AUA has risen over the years, and so have gross and net revenues.
The group is optimistic that AUA can continue to scale new heights, barring unforeseen circumstances such as another Global Financial Crisis. In fact, management has a bold vision of AUA hitting the S$100 billion mark by 2028, as it believes Asia still has ample room for iFast to grow.
Reason 2: Free cash flow consistency
The table shows iFast’s free cash flow (FCF) generation over the last five fiscal years, as well as in H1 2019. The group managed to generate FCF in four out of five fiscal years, and H1 2019 also saw continued FCF generation. This is in spite of the group needing funds to continually upgrade and enhance its platform for users. This healthy pattern of FCF generation boosts confidence in iFast’s ability to continue to pay dividends.
Reason 3: Dividend history
A company’s dividend history usually offers good information on whether management is willing to reward shareholders. For iFast’s case, it has been paying a quarterly dividend consistently since its IPO in 2014, and the dividends have also been growing over the years, from 2.79 Singapore cents in FY 2015 to 3.15 Singapore cents in FY 2018. While the group has to stump up more resources and funds in order to bid for the digital banking licence, it is likely to tap on debt financing (as it did for its Hong Kong digital banking licence application) and thus, I do not believe it will impact the dividend payment in future years.
Steady and predictable dividends
Based on the three reasons above, I believe iFast can continue its dividend-paying track record. Based on the last traded share price of S$1.02, iFast provides a trailing 12-month dividend yield of around 3.1%.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of iFast Corporation Limited. Motley Fool Singapore contributor Royston Yang owns shares in iFast Corporation Limited.