These 3 Blue Chip Companies Have Higher Dividend Yields Than Straits Time Index
Income investors are generally looking to invest in stable companies that can sustain dividend payments for long period of time.
Moreover, they want to buy these companies at relatively attractive valuations. Here, one of the main criteria of an attractive valuation is a high dividend yield.
In other words, we are looking for stable blue chip companies that have above-average market yields. Here, an above average yield is one that is higher than the SPDR® Straits Times Index ETF yield of 2.9%.
With that, let’s look at the three blue chip that meet that criteria.
The first company on our list is Singapore Telecommunications Limited (SGX: Z74), which is one of the three main telecom players in Singapore. The other two are StarHub Ltd (SGX: CC3), and M1 Ltd (SGX: B2F).
As compared to its peers, SingTel has a more diversified income based, since it derives a significant amount of its income from overseas countries like Australia, India, Thailand and others.
In term of dividend policy, SingTel has a policy of paying about 65% to 70% of profits per year as dividend to shareholders. Since 2005, the dividend per share has risen from 13 cents to 17.5 cents in 2016. This does not include special dividends during the period.
At the current price of $3.79, SingTel is trading at dividend yield of 4.6%.
Singapore Technologies Engineering Ltd
The next company on our list is Singapore Technologies Engineering Ltd (SGX: S63) or STE in short.
STE is a conglomerate with business interest in various areas. It operates in four different industries, namely Aerospace, Electronics, Land Systems, Marine and others.
For dividend investors, STE will stand out as a good performer, since it has continuously paid a stable and increasing dividend since 1997, with dividends rising from 1.8 cent per share to 15 cent in 2016.
At the latest price of $3.71, dividend yield is 4.0 %.
ComfortDelgro Corporation Limited (SGX: C52) is a transportation company with operations mainly in Singapore, Australia, the United Kingdom, and China. It is also the majority owner of vehicle and non-vehicle testing and inspection outfit Vicom Limited (SGX: V01) and bus and rail services operator SBS Transit Ltd (SGX: S61).
Comfortdelgro has consistently paid dividends for the last 10 years, maintaining dividend per share of between 5 to 10 cents in the last 10 years. The latest dividend in 2016 was 10.3 cents per share.
Recently, however, the company has been facing increasing threat to its taxi business due to the growth of ride-sharing led by Grab and Uber. Thus, it is important that investors take this into account when evaluating the sustainability of future dividends.
At the latest price of $2.37, the dividend yield was 4.4 %.
The above are three blue-chip companies with above-average dividend yields.
Though these companies generally have stable business operations, it’s important that investors do not use past performance as a guide of future performance. After all, businesses do change and these companies are not immune from such changes.
Thus, it is important that investors evaluate the future prospects of these companies before investing in them, especially since these companies can sustain their dividends only through strong business performance.