Disrupted Dividends: Will the STI’s “Cash Kings” Keep Paying – Or Go Kaput?

By Chin Hui Leong

As you may know, the Singapore stock market is home to some of the highest dividends payers in Asia.

The SPDR STI ETF (SGX: ES3) – which mimics the fundamentals of the Straits Times Index (SGX: ^STI) – has a dividend yield of 2.81%, as of 15 May 2018. To be sure, the index has 30 companies with varying levels of dividends. Using our data provider, I ran a report to provide you some insight into these dividend payers.

If you’re anything like me, you love the steady stream of income that dividends can bring to your portfolio – but you also want to own only the best dividend stocks. As Warren Buffett has said, the #1 rule in investing is “never lose money!”

The hidden dangers lurking in Singapore’s most popular dividend payers could sink your portfolio. That’s why the Gold team has prepared this special report. Credit: Simon Cunningham

So here are the top 10 stocks with the highest dividend yields in the Straits Times Index (data as of 15 May 2018), and a quick brief on each company’s prospects:

  1. Hutchison Port Holdings Trust (SGX: NS8U) tops the list with a trailing dividend yield of 7.62%. But some caution is warranted. The container port owner has reduced its distribution three times in as many years. In 2017, Hutchison Port Holdings Trust reduced its distributions by over 32%.
  2. Second on the list is StarHub Ltd (SGX: CC3) with a yield of 7.34%. The telco lowered its dividend by 20% in 2017, marking the first time dividends were reduced in seven years. For 2018, StarHub intends to pay a dividend per share of 16 cents.
  3. Industrial-based Ascendas REIT (SGX: A17U) is in third place with a 5.99% distribution yield. The REIT has recorded an increase in distribution per unit (DPU) in each of the last eight fiscal years. For the financial year ended 31 March 2018, distributions rose 1.5% year-on-year. Ascendas REIT said that conditions are improving on the back of a better economy and less new supply coming online. However, its customers remain cautious.
  4. Yet another REIT, CapitaLand Mall Trust (SGX: C38U) comes in at fourth place and has a distribution yield of 5.34%. The shopping mall owner had recorded a DPU (dividend per unit) increase for each year between 2011 and 2015. But in 2016, there was a slight decline in DPU amid the redevelopment of one of its properties. DPU for 2017 was showed a minor increase.
  5. StarHub’s rival, Singapore Telecommunications Limited (SGX: Z74), dials in at fifth place with a dividend yield of 4.93%. Unlike StarHub, Singtel did not cut its interim dividend for the latest fiscal year. Singtel’s ordinary dividend per share has not budged since the fiscal year ending 31 March 2015. To be sure, the telco paid out a special dividend of three cents per share in January which was financed by the divestment of its NetLink NBN Trust (SGX: CJLU) stake.
  6. Another REIT, CapitaLand Commercial Trust (SGX: C61U) comes in sixth with a distribution yield of 5.4%. Much like its name, the REIT owns commercial properties. Historically, the commercial rental space can be volatile. However, CapitaLand Commercial Trust has managed to increase DPU every year between 2011 and 2016. The run came to an end in 2017 when the REIT opted to issue new units to finance an major acquisition. The move increased the REIT’s unit base and subsequently, reduced its DPU for 2017.
  7. ComfortDelGro Corporation Limited (SGX: C52) drives into at seventh place with a yield of 4.46%. Between 2012 and 2017, dividend per share has risen from 6.40 cents to 10.40 cents. The firm’s taxi business, though, continues to under pressure from upstarts such as Grab.
  8. Engineering firm Singapore Technologies Engineering Ltd (SGX: S63) slots in at eight place with a yield of 4.42%. To be sure, its annual dividend per share has not changed in the last five years. ST Engineering is off to a strong start in 2018, recording a 9% year-on-year increase in sales and an 18% rise in profits in the first-quarter.
  9. SIA Engineering (SGX: S59) flies into ninth place with a trailing dividend yield of 3.94%. Unfortunately, its ordinary dividend per share fell from 22 cents in financial year ended 31 March 2013 (FY12/13) to 13 cents in FY16/17. To be sure, the company paid out a special dividend of five cents per share in FY16/17, and maintained its ordinary dividend payout at 13 cents for FY17/18.
  10. Yangzijiang Shipbuilding (SGX: BS6) sails into our 10th and final spot with a 3.78% dividend yield. The company’s dividend payout has been choppy, ranging from a high of RMB 0.2575 in 2014 to a low of RMB 0.1922 in 2016. Given the cyclical nature of the shipbuilding business, we should expect dividends payouts to move up or down alongside its business performance.

It’s true that looking at the Straits Times Index’s highest dividends yield helps you become familiar with the sort of dividends available in the Singapore stock market. But, bear in mind, a word of caution is necessary!

All  21 SGX picks inside Stock Advisor Gold pay a dividend. But, as you’ll discover, we’re highly selective about which stocks make the grade.

A high dividend alone is not enough for serious investors to put money behind a stock. As Foolish investors, we’re looking for companies that can defend their businesses, generate strong cash flows, and pay a dividend – all at the same time.

These are the kind of stocks we look to recommend for our Stock Advisor Gold members. In fact, all 21 of the active Singaporean stock recommendations on our scorecard pay dividends! So you begin to see how much we love a good income stream, just like you.

To learn more, simply stay tuned. Over the coming days, you’ll discover all the details about Stock Advisor Gold.

Remember, this report you’re reading today is just a small piece of all the exclusive, proprietary Stock Advisor Gold research and content our Gold team will be offering you over the course of the week!

And if you have any further questions about everything that Stock Advisor Gold offers, please visit our highly informative Stock Advisor Gold FAQ page.


Disclosure: Chin Hui Leong owns CapitaLand Mall Trust. The Motley Fool Singapore has recommended CapitaLand Mall Trust and Singapore Exchange. Data as of 15 May 2018.