The Top 6 Quality Dividend Stocks from the Singapore Stock Market
Last week, Singapore Exchange Limited (SGX: S68) launched the SGX Developed Asia ex Japan Quality Index.
The new index is a regional index built on what are considered to be “quality factors.” In the accompanying report for the launch of the index, SGX outlined its selection criteria, which includes financial metrics such as the net profit margin, the return on equity and invested capital, and the level of financial leverage and accrued income.
In all, the index has 60 companies with 21 listed companies from Singapore making the cut. Of the 21 companies, 12 were component stocks of the Straits Times Index (SGX: ^STI) while the rest were non-Straits Times Index stocks.
From there, I picked out the five companies with the highest dividend yield so that we have a taste of what the quality index holds (figures as of 14 April 2017 unless otherwise stated):
1. StarHub Ltd (SGX: CC3) tops the list with a trailing dividend yield of 6%. The telco has a market cap that is approaching $6 billion and shares have delivered an annual total return of 3.4% over the last five years. Although it’s in an index built on quality factors, StarHub has signaled that it will reduce its annual dividend from 20 cents per share in 2016 to 16 cents per share in 2017. The 6% dividend cited above is based on a payout of 20 cents, so investors should note that the telco’s dividends are slated to decline in 2017.
2. Another telco, M1 Ltd (SGX: B2F), is also sporting a dividend yield of 6%. However, M1 had cut its dividend in both 2015 and 2016. Like StarHub, there is no guarantee that M1’sdividend will remain the same in 2017. Over the last five years, M1 shares have delivered a total return of 2.3% per year.
3. Silverlake Axis Ltd (SGX: 5CP) is in third place with a trailing dividend yield of 5.1%. The banking software provider has a market cap of $1.5 billion and has delivered a 5-year annualised total return of 19.6%. Investors may want to note that the company was the subject of a short-attack in 2015.
4. In fourth place is Venture Corporation Ltd (SGX: V03), a provider of electronics manufacturing services. Venture offers a dividend yield of 4.3% and has delivered a total return of 13.6% per year over the last five years. The company’s dividend was unchanged in 2016, compared to 2015.
5. Tied for fifth place are two companies which bear the word “Singapore” in their name. They are logistics and mail services provider Singapore Post Ltd (SGX: S08), and the media and property development company Singapore Press Holdings Limited (SGX: T39) – the duo are both offering a 4.1% dividend yield. The former weighs in at a little over $3 billion in market cap while the latter has a market cap of over $5.5 billion. The similarities between the two also extend to the downside. Both Singapore Post and SPH are subject to disruptive technologies and have reduced their dividends recently.
There is usually a good reason why companies are offering higher yields. As investors, it is our duty to find out the possible reasons and decide whether the concerns are valid or not.