A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Singapore Airlines Limited (SGX:C6L) has been paying a dividend to shareholders. Today it yields 4.3%. Does Singapore Airlines tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
Here’s how I find good dividend stocks
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Singapore Airlines pass our checks?
Singapore Airlines has a trailing twelve-month payout ratio of 98%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 57%, which, assuming the share price stays the same, leads to a dividend yield of around 3.8%. Moreover, EPS should increase to SGD0.59, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Not only have dividend payouts from Singapore Airlines fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, Singapore Airlines has a yield of 4.3%, which is high for Airlines stocks but still below the market’s top dividend payers.
After digging a little deeper into Singapore Airlines’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. 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. There are three key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for C6L’s future growth? Take a look at our free research report of analyst consensus for C6L’s outlook.
- Historical Performance: What has C6L’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 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.