Why Singapore Telecommunications Limited (SGX:Z74) Is A Top Dividend Stock
There is a lot to be liked about Singapore Telecommunications Limited (SGX:Z74) as an income stock. It has paid dividends over the past 10 years. The company is currently worth S$50b, and now yields roughly 5.7%. Should it have a place in your portfolio? Let’s take a look at Singapore Telecommunications in more detail.
Check out our latest analysis for Singapore Telecommunications
5 checks you should do on a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
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 the amount of dividend per share grown over the past?
Is is able 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?
How well does Singapore Telecommunications fit our criteria?
The company currently pays out 89% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 80% which, assuming the share price stays the same, leads to a dividend yield of around 5.7%. However, EPS should increase to SGD0.20, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
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. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes Z74 a true dividend rockstar.
In terms of its peers, Singapore Telecommunications generates a yield of 5.7%, which is high for Telecom stocks but still below the market’s top dividend payers.
Next Steps:
Taking into account the dividend metrics, Singapore Telecommunications ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. 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 aspects you should look at:
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 editorial-team@simplywallst.com.
