Is Singapore Exchange Limited (SGX:S68) A Great Dividend Stock?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Singapore Exchange Limited (SGX:S68) has returned to shareholders over the past 10 years, an average dividend yield of 4.00% annually. Does Singapore Exchange tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Singapore Exchange
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has it paid dividend every year without dramatically reducing payout in the past?
Has the amount of dividend per share grown over the past?
Is its earnings sufficient to payout dividend at the current rate?
Will the company be able to keep paying dividend based on the future earnings growth?
How does Singapore Exchange fare?
The current trailing twelve-month payout ratio for the stock is 82.18%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect S68’s payout to remain around the same level at 86.44% of its earnings, which leads to a dividend yield of 4.16%. Furthermore, EPS should increase to SGD0.37. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time. Relative to peers, Singapore Exchange produces a yield of 3.63%, which is high for Capital Markets stocks but still below the market’s top dividend payers.
Next Steps:
With these dividend metrics in mind, I definitely rank Singapore Exchange as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for S68’s future growth? Take a look at our free research report of analyst consensus for S68’s outlook.
Valuation: What is S68 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 S68 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 pass 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.
