Singapore Telecommunications Limited (SGX:Z74) has pleased shareholders over the past 10 years, by paying out dividends. The company currently pays out a dividend yield of 6.0% to shareholders, making it a relatively attractive dividend stock. Does Singapore Telecommunications tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How well does Singapore Telecommunications fit our criteria?
Singapore Telecommunications has a trailing twelve-month payout ratio of 89%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 79% which, assuming the share price stays the same, leads to a dividend yield of 6.0%. However, EPS should increase to SGD0.20, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there's one type of stock you want to be reliable, it's dividend stocks and their stable income-generating ability. Z74 has increased its DPS from SGD0.13 to SGD0.17 in the past 10 years. It has also been paying out dividend consistently during this time, as you'd expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Singapore Telecommunications has a yield of 6.0%, which is high for Telecom stocks but still below the market's top dividend payers.
Keeping in mind the dividend characteristics above, Singapore Telecommunications is definitely worth considering for investors looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. Below, I've compiled three important factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for Z74’s future growth? Take a look at our free research report of analyst consensus for Z74’s outlook.
- Valuation: What is Z74 worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether Z74 is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.