3 cash-rich, rock-solid Singapore stocks with REIT-like dividend yields

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Dividends, who doesn’t love ’em?

Dividends can be a form of passive income to supplement our salary or even sustain our lifestyle when we have retired.

Here, let’s look at three companies that could be strong candidates to be in a dividend investor’s portfolio.

Those companies have strong cash-generating abilities and rock-solid balance sheets containing loads of cash with little or no debt.

They also have dividends yields of above 3 per cent each , with one stock having a yield of over 7 per cent.

The tasty yields are sure to attract income investors at a time when the REITs are either cutting their distributions or seeing their unit prices run up quickly , tanking their yields to below 4 per cent.

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Company #1: PNE Industries Ltd

PNE Industries Ltd operates in two business segments of contract manufacturing and trading. The products sold under the first segment include electronic controllers and other electrical and electronic products.

PNE has paid dividends at least once annually since 2007.

The following table shows PNE’s dividend per share and dividend payout ratio over the last couple of years (the company has a Sept 30 year-end):

 

FY2017 FY2018 FY2019
Ordinary dividend per share (Singapore cents) 5.0 5.0 5.0
Special dividend per share (Singapore cents) 7.0 1.0 4.0
Total dividend per share (Singapore cents) 12.0 6.0 9.0
Dividend payout ratio 41 per cent (excluding special dividend) and 98 per cent (including) 79 per cent (excluding special dividend) and 95 per cent (including) 52 per cent (excluding special dividend) and 93 per cent (including)

 

We can see that PNE has paid out stable and conservative dividends.

The company doesn’t have any formal dividend policy, but its dividend payout ratio (including special dividends) have always conservatively been below 100 per cent .

PNE also has a rock-solid balance sheet with loads of cash and zero borrowings. As of March 31, 2020, it had $47.6 million in cash and bank balances.

It also generated ample free cash flow for the half-year ended March 31, 2020. Free cash flow surged by over 400 per cent to around $12.2 million.

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PNE’s strong cash generation ability should allow it to continue paying dividends for FY2020, despite the uncertainties brought about by Covid-19.

It has already paid out an interim dividend of 3.0 cents per share (includes 1.0 cent in special dividend) for the year, same as the previous year.

At PNE’s share price of $0.79, it has a price-to-earnings (P/E) ratio of 10x and a dividend yield of 7.6 per cent (excluding special dividend).

Company #2: Valuetronics Holdings Limited

Valuetronics Holdings Limited is an integrated electronics manufacturing services provider with its headquarters in Hong Kong.

The company offers a wide range of design, engineering, manufacturing, and supply chain support services for electronic and electro-mechanical products.

Valuetronics was listed in March 2007 and it has been paying dividends since then (the company has a March 31 year-end).

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Valuetronics has a conservative dividend policy of paying out 30 per cent to 50 per cent of its net profit as ordinary dividends. In FY2020, its dividend payout ratio was 48.5 per cent.

With a cash position of HK$1.05 billion (S$184 million) and zero debt at end-March 2020 and strong cash flow generating abilities, Valuetronics is highly likely to continue dishing out growing dividends in the future.

At Valuetronics’ share price of $0.575, it has a P/E ratio of 7x and a dividend yield of 6.1 per cent.

Company #3: Venture

Venture Corporation Ltd (SGX: V03) is a global electronics services provider that supports designing, manufacturing, and e-fulfilment of high-mix, high-value and sophisticated products.

Shareholders would be delighted to note that Venture’s total dividend from FY2015 to FY2019 had grown by 40 per cent in all (the company has a Dec 31 year-end).

FY2015 FY2016 FY2017 FY2018 FY2019
Total dividend per share (Singapore cents) 50.0 50.0 60.0 70.0 70.0
Dividend payout ratio 90 per cent 77 per cent 48 per cent 55 per cent 56 per cent

We can see from the table above that Venture’s dividend payout ratio has been below 100 per cent throughout the past five years.

Venture doesn’t have a formal dividend policy, but it aims to pay dividends that are on par or more than the previous year.

ALSO READ: 3 dividend stocks with at least 150% growth for the past 4 years

In the first half of 2020, its interim dividend per share rose 25 per cent year-on-year to 0.25 Singapore cents. The higher dividend was supported by free cash flow growth of 20.6 per cent year-on-year.

That made Venture to be featured as one of the companies that managed to raise its dividend amid dividend cuts by others.

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Just like PNE and Valuetronics, Venture’s balance sheet is rock-solid. As of June 30, 2020, it had $834.1 million in cash balance with bank loans of just $1.1 million.

At Venture’s share price of $20.41, it has a P/E ratio of 19x and a dividend yield of 3.7 per cent.

This article was first published in SeedlyDisclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock.