SO THE MARKET is expected to fall today -- following last Friday's rout on the New York stock exchange and a return of the euro crisis. In such times, stocks with a good track record of dividend payouts can be a refuge as well as a hedge against inflation. At current valuation levels, there are close to 100 stocks listed on the Singapore exchange that are trading at dividend yields of 5% or more and have paid dividends in the past 3 financial years.
Below are some examples of high dividend yield stocks in electronics manufacturing, offshore oil & gas, construction, and telecommunications. Any fall in their stock price can only increase the dividend yield to even more yummy levels.
Valuetronics – 11% dividend yield
Valuetronics is an integrated electronics manufacturing services (EMS) provider, offering a competitive and broad combination of design, engineering, and manufacturing services, particularly for white goods.
It also has an exclusive license to use the “Whirlpool”, “Maytag” and “Amana” brands for a range of home comfort appliances in the North American market.
For its financial year ended 31 Mar 2012, it reported a 36.8% year-on-year jump in 4QFY12 net profit to HK$38.4m on the back of a 14.2% increase in revenue to HK$607.2m.
Sequentially, revenue fell slightly by 1.6% but net profit rose 22.0%.
Total dividends declared for FY2012 was 17 HK cents, which includes a one-cent special dividend. This is the highest dividend since its IPO in Mar 2007.
Based on its recent stock price of 25.5 cents, the stock has a dividend yield of 11%.
OCBC Investment Research has a ‘Buy’ call on Valuetronics with fair value pegged at 31.5 cents
Technics Oil & Gas – 9% dividend yield
The oil & gas industry has a positive outlook as elevated oil prices encourage capital expenditure in the sector.
Oil & gas engineering and procurement integration services provider, Technics Oil & Gas, is a niche player in integrating process modules for FPSOs.
In Southeast Asia, it is a leading player for supplying and installing FPSO gas compression systems, the vessel's key process module.
The company has a strong earnings record: 5-year revenue CAGR is 20%.
1H2012 net earnings grew 19% year-on-year to S$10.3 million and net profit margins have remained above 10% in the past 3 years.
It also has a consistent dividend track record, having paid 10.5 cents for FY2010 and 12 cents a share for FY2011.
The company has guided for an 8-cent dividend for its 3Q2012 results which will be announced in July, according to a AmFraser report dated 12 Apr.
This means the dividend yield is as high as 9.0%, based on its recent stock price of 88.5 cents.
AmFraser has a ‘Buy’ recommendation on Technics with the target price at S$1.22.
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KSH – 6.5% dividend yield
Real estate developers seldom pay good dividends due to the need for a huge cost outlay in land banking and construction.
Then, there are construction players who also do real estate development and investment, and balance between riding the long term capital gains of Singapore real estate versus accumulating a cash hoard that is good enough for regular dividend payouts.
Take KSH, for example. The construction contractor trades at about 23 cents and is paying dividends totaling 1.5 cents for FY2012 (year end 31 Mar). This translates into a dividend yield of about 6.5%.
Its stock price dipped in Feb after it reported a sharp drop in 3Q12 construction revenue. FY2012 revenue was down 35% at S$170.6 million due lower contributions from construction projects.
Its real estate development sector has increased over the past financial year and this helps mitigate the drop in its construction revenues.
Construction accounted for 85.2% of group revenue in FY2012. Revenue from Property Development and Management accounted for 14.8%, significantly larger than the 2.1% in FY2011.
The company has order books of about S$467 million to be delivered through 2014. It also recently announced a one-for-10 bonus issue.
OCBC Investment Research has a target price of 25 cents for KSH with a ‘Hold’ call.
Starhub – 6.2% dividend yield
Even among STI stocks, there are high yield stocks and some of these may not even be a REIT.
Telcos have defensive earnings and attractive yields offering a safe harbor for the risk-adverse investors.
Starhub has guided that it will pay total dividends of 20 cents per share for FY2012, in line with what it paid in the past two years.
This translates into a dividend yield of 6.2%, the highest among STI component stocks.
Its operating revenue grew 6% to S$591 million in 1Q2012 while service revenue grew 3% to S$549 million. The company expects to maintain revenue growth in the low single-digit range.
There may be good reason for its high dividend yield: Consensus fair value for the stock is S$3.02 versus its recent stock price of S$3.23.
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