Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Singapore Post Limited (SGX:S08) has paid a dividend to shareholders. It currently yields 3.4%. Let’s dig deeper into whether Singapore Post should have a place in your portfolio.
5 checks you should use to assess a dividend stock
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 dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Singapore Post fare?
The current trailing twelve-month payout ratio for the stock is 80%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a payout ratio of 78%, leading to a dividend yield of 4.0%. Furthermore, EPS should increase to SGD0.050.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Dividend payments from Singapore Post have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, Singapore Post produces a yield of 3.4%, which is high for Logistics stocks but still below the market’s top dividend payers.
Taking all the above into account, Singapore Post is a complicated pick for dividend investors given that there are a couple of positive things about it as well as negative. 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, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three pertinent aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for S08’s future growth? Take a look at our free research report of analyst consensus for S08’s outlook.
- Valuation: What is S08 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 S08 is currently mispriced by the market.
- 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.