5 Stocks Under The Dividend Portfolio Series

Heads-up -> If you haven’t heard of the “Dividend Portfolio Series” before, do check out our 4 portfolios to help you screen stocks based on your investment personality over at http://portfolio.shareinvestor.com.

There are many things Singaporeans love: food, shopping malls and dividends (yes!). That’s probably the reason why the Singapore Exchange is a haven for many REITs and Business Trusts which want to sell to the affluent income-hungry investors in Singapore.

On that note, there are many reasons why Singaporeans love dividend investing. One of them is that they require less time and effort monitoring their portfolio, perfect for working adults with hectic schedules.

Secondly, many retirees love the fact that income investing can generate a steady stream of passive income and the dividends provide some sort of a safety net during downturns.

With that in mind, we came up with 4 metrics inside ShareInvestor WebPro to screen for dividends stocks (data as of 28 Aug 2019):

  • Dividend yield >4%
    Experts consider the 4% withdrawal rate to be a safe, minimum yield to sustain one’s retirement lifestyle.
  • Dividend Payout ratio <1x
    To avoid companies to paying dividends from debt.
  • Net Debt to Equity < 0.5x
    We go for net gearing below 50% to be on the safe side.
  • CAGR of DPU >2% for past 3 years
    Its important to keep the dividend growing to capitalize on share price gains too.

Sourced from Shareinvestor’s Webpro

And below are the 5 companies we have chosen among the list; spread across SGX, Bursa and HKEX:

1. SBS TRANSIT LIMITED (S61.SI)

SBS Transit is one of the leading bus operators in this part of the world and started rail operations in 2003. It was formed in 1973 through the merger of three private bus companies and listed on the then Stock Exchange of Singapore (SES), now known as SGX, in 1978 as Singapore Bus Service (1978) Limited.

Singapore Bus Services Limited changed its name to SBS Transit Ltd in November 2001 to reflect its bi-modal status as a bus and rail operator. Today, SBS Transit operates 217 route services with a scheduled fleet of more than 2,700 buses. The buses serve 16 interchanges and more than 3,000 bus stops.

In 2003, SBS Transit started its light rail operations in Sengkang and also started operating its Mass Rapid Transit (MRT) system, the North East Line (NEL) in the same year. In 2005, SBS Transit began operating the Punggol LRT System.

SBS Transit staged a remarkable ascent in its share price year-to-date soaring from $2.70 in 3rd January 2019 to $4.07 at the time of writing. That translates to more than 50% capital gains within 9 months as shown above.

Financial Snapshot sourced from ShareInvestor’s Webpro

We can attribute a few reasons for the jump in SBS Transit’s stock as seen from the financial snapshot above:

  • Revenue advancing over past 5 years
  • Positive and increasing free cash flow for at least 3 years
  • Min. profit growth of 10% in last 3 consecutive years
  • Steady hike in Dividends over past 60 months.

That said, the more important factors are probably the shift to the bus contracting model (BCM) where the Government takes ownership of all fixed and operating assets, and bus operators are paid a fixed sum to ply services.

In addition, the Land Transport Authority (LTA) has bought over operating assets on the North-East MRT as well as the Sengkang and Punggol LRT lines from SBS Transit as part of the new rail financing framework (NRFF).

This transfer of assets to the government helps to relieve SBS Transit of the heavy maintenance costs of asset renewal and upgrades. Hence, we have been seeing strong revenue and profit growth over the past years.

Next up, we look at the dividend analysis of SBS Transit.

Sourced from ShareInvestor’s WebPro

When you look at the “earnings against dividend” chart above, it is evident that earnings and dividends have gone up hand-in-hand from FY2014 onwards.

Although SBS Transit does not have a formal dividend policy, it has continued to pay close to 50% from the very beginning.

Sourced from ShareInvestor’s WebPro

As per the table above, the semi-annual dividend distributions have climbed steadily from FY2013 onwards from 1.8 cents to an incredible 12.9 cents in FY2018 – a 700% surge over just 5 years!

Based on its share price of S$4.07 per share, SBS Transit trades at around 15.8 times its price-to-earnings ratio and has a dividend yield of 3.17%.

2. MAPLETREE INDUSTRIAL TRUST (ME8U.SI)

Mapletree Industrial Trust ("MIT") is a real estate investment trust listed on the Main Board of Singapore Exchange. Its principal investment strategy is to invest in a diversified portfolio of income-producing real estate used primarily for industrial purposes in Singapore and income-producing real estate used primarily as data centres worldwide beyond Singapore, as well as real estate-related assets.

Its portfolio includes a diverse mix of business parks, hi-tech industrial buildings, ramp-up buildings and flatted factories. They comprise of 87 industrial properties in Singapore and 14 data centres in the United States of America (40% interest through the joint venture with Mapletree Investments Pte Ltd).

The properties in Singapore include Hi-Tech Buildings, Flatted Factories, Business Park Buildings, Stack-up/Ramp-up Buildings and Light Industrial Buildings. As at 30 June 2019, MIT’s total assets under management was S$4.8 billion.

Sourced from ShareInvestor’s WebPro

MapleTree Industrial Trust’s share price has been performing well in the past 5 years, up 57.6% from S$1.44 in 28 Aug 2014 to S$2.27 today.

The increase in share price can be attributed to one primary reason – the steady climb of the distributable income over the years as seen below.

Sourced from MIT 1QFY19/20 Financial Results

The above chart is evident of how well the trust is being managed. It requires great foresight and constant efficiency to acquire yield-accretive properties and positive rental reversions to drive such steady, incremental hikes in its distributable income.

Based on its share price of S$2.27 per share, the group trades at around 1.52 times its price-to-book ratio and offers a distribution yield of 5.35%.

3. PAVILION REAL ESTATE INVESTMENT TRUST (5212.MY)

Pavilion Real Estate Investment Trust ("Pavilion REIT") is one of the largest retail concentrated REIT in Malaysia. The principal investment policy of Pavilion REIT is to invest in income producing real estate used predominantly for retail purposes (including mixed-use developments with a retail component) in Malaysia and other countries within the Asia-Pacific region.

The portfolio assets are strategically located in the heart of the golden triangle of Kuala Lumpur with names like Pavilion Mall, Pavilion Tower, Intermark Mall etc.

Sourced from ShareInvestor’s WebPro

Pavilion REIT’s share price has fluctuated between MYR1.40 and MYR1.88 in the past 5 years. In fact, it fell to a 5-year low around March 2018 but rebounded quickly to a high of MYR1.88 at the time of writing.

Upon further digging, the V-shape recovery can be primarily due to the purchase of a newly acquired Elite Pavilion Mall (EPM). According to its FY2018 annual report, Pavilion REIT completed the acquisition of the Elite Pavilion Mall together with the related assets and rights for a total consideration of RM580.0 million. This acquisition was financed via debt and led to an increased gearing ratio from 25.9% to 33.8%.

Sourced from ShareInvestor’s WebPro

On a side note, although earnings per unit have plunged from 20.99 MYR cents in FY2012 to 8.24 MYR cents in FY2017, things seem to be looking up again with the figure slowly inching up in the past 3 years.

Sourced from ShareInvestor’s WebPro

A quick comparison of the distributions from FY2012 also indicates a trend of rising distributions partly because the REIT have not distributed a big portion of its earnings from FY2012 to FY2014.

As such, FY2019 looks set to be another record year given that its 1st Half FY2019 distribution per unit (“DPU”) is MYR 4.4 cents compared to MYR 4.34 cents last year.

According to Fifthperson’s review of Pavilion REIT 2019 AGM, the outlook of the REIT looks positive as well with the below factors:

  • Small tenant concentration risk as top 10 tenants only make up 12.0% of its 2018 gross rental income
  • Pavilion REIT still have rights of first refusal for several malls under its sponsor
  • Pavilion Kuala Lumpur Mall has secured a 4.4% positive rental reversion in 2018 and is expected to continue its single-digit positive rental reversion in 2019.

Based on its share price of MYR$1.87 per share, Pavilion REIT trades at 1.43 times its price-to-book and has a dividend yield of 4.69%.

4. CHINA CONSTRUCTION BANK (939.HK)

Dubbed as one of the "Four Big" banks in the People's Republic of China, China Construction Bank Corp. (“CCB”) engages in the provision of a wide range of financial services to corporate and personal customers. It operates through the following business segments:

  • Corporate Banking
  • Personal Banking
  • Treasury and
  • Others

The Corporate Banking segment provides a range of financial products and services to corporations, government agencies and financial institutions including corporate loans, trade financing, wealth management services etc.

The Personal Banking segment caters to individual customers and provides them services such as personal loans, card business, remittance services and more.

The Treasury segment represents inter-bank money market transactions, repurchase and resale transactions, investments in debt securities, and trade of derivatives and foreign currency.

The Others segment refers to equity investments and revenues, results, assets and liabilities of overseas branches and subsidiaries.

To sum up, the Bank serves hundreds of millions of personal and corporate customers in 29 countries and regions with nearly 200 commercial banking entities at various levels.

Without further ado, let’s dive in to check what analysts have in mind for CCB.

Sourced from ShareInvestor’s WebPro

There are 17 analysts covering CCB and the sentiment is generally positive with an average BUY consensus recommendation. Moreover, they have given a mean target price of HKD 8.58 which translates to a potential upside of 48% - pretty momentous in my perspective.

Next up, we zoom into the Dividend analysis portion of CCB.

Sourced from ShareInvestor’s WebPro

Looking at the above, the dividends per share have been relatively steady over the past 8 years and increasing in tandem with the earnings per share. Dividend payout ratio is also healthy at roughly 30 to 35%, which means they can afford to continue paying dividends even if the earnings take a dip during downturns.

Based on its share price of HK$5.80 per share, the group trades at 0.63 times its price-to-book ratio and offers an alluring 6.02% dividend yield.

5. ZOOMLION (1157.HK)

Founded in 1992, Zoomlion Heavy Industry Science & Technology Co., Ltd. (“Zoomlion”) is mainly engaged in developing and manufacturing major high-tech equipment in the areas of engineering industry and agricultural industry.

With more than 20 years of innovation and development, the company possesses 10 major categories and 55 product lines, as well as nearly 460 leading products. Zoomlion is China's first construction machinery company to be listed on both Shenzhen and Hong Kong stock exchanges.

At the present, Zoomlion products (e.g. mobile cranes, earthmoving vehicles, fork lifters) have been sold to more than 100 countries through its subsidiaries and resident offices around the world.

Sourced from ShareInvestor’s WebPro

Zoomlion last traded at HK$4.78, almost unchanged from 5 years ago. However, it has zoomed up around 60% in just a year from HK$3.05 from 28 Aug 2018.

Sourced from ShareInvestor’s WebPro

The reason behind the share price movement can easily be depicted by the Profit and Loss chart as seen above.

Zoomlion’s total revenue fell from a high of HK$58.77 billion in FY2012 to HK$23.13 billion in FY2016. Net profits after tax ensued and plunged to a loss of HK$1.186 billion in FY2016.

However, it subsequently turned positive and skyrocketed to HK$2.99 billion trailing 12M Mar 2019. This is probably what fuelled the jump in share price for the past year.

Sourced from ShareInvestor’s WebPro

The same can also be said for its dividend trend. The company’s dividends per share have fallen off track from FY2012 to FY2016 but started to grow again since then. Its dividend payout ratio has also come under control at around 0.91x in FY2018 as compared to the alarming 14.3x in FY2015.

Based on its share price of HK$4.78 per share, the group trades at 15.6 times its trailing price-to-earnings ratio and has a decent dividend yield of 5.86%.

Conclusion

Looking at the above-mentioned companies, we noticed a pattern where stock prices tend to go up when dividends are increased. Furthermore, dividend-paying companies also tend to be more mature and stable than their non-dividend counterparts i.e. SBS Transit and China Construction Bank.

As such, dividend investing makes a good investment strategy where investors can focus on solid companies that increase their dividends regularly to generate a steady stream of passive income. But as always, you need to do your own due diligence to avoid investing in any dividend stocks blindly.

Check out ShareInvestor’s webpro to access timely updates to empower your investment research - http://www.shareinvestor.com/sg

Happy investing!

 

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