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Attention dividend hunters! Singapore Exchange Limited (SGX:S68) will be distributing its dividend of S$0.15 per share on the 05 October 2018, and will start trading ex-dividend in 4 days time on the 26 September 2018. What does this mean for current shareholders and potential investors? Below, I will explain how holding Singapore Exchange can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
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:
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Is it paying an annual yield above 75% of dividend payers?
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Does it consistently pay out dividends without missing a payment of significantly cutting payout?
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Has dividend per share risen in the past couple of years?
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Is its earnings sufficient to payout dividend at the current rate?
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Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Singapore Exchange fit our criteria?
The company currently pays out 88.4% 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 a payout ratio of 85.7%, leading to a dividend yield of 4.5%. Furthermore, EPS should increase to SGD0.35.
If you want to dive deeper into the sustainability of a certain payout ratio, you may wish to consider the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
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. Dividend payments from Singapore Exchange 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.
Relative to peers, Singapore Exchange generates a yield of 4.1%, which is on the low-side for Capital Markets stocks.
Next Steps:
If Singapore Exchange is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. 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 pertinent factors you should further research: