Income investors generally seek to invest in stable companies that can sustain dividend payments for a long period of time.
Moreover, these investors seek to acquire such companies at relatively attractive valuations. Here, one of the main criteria of an attractive valuation is a high dividend yield.
In other words, we’re looking for stable blue-chip companies that have above-average market yields. Here, an above-average yield is one higher than the SPDR STI ETF‘s (SGX: ES3) yield of 3.8%.
Let’s look at two blue chips that meet the above description.
No. 1: United Overseas Bank Ltd
Local bank United Overseas Bank Ltd (SGX: U11) has been a solid performer over the last decade, growing total income from S$5.3 billion in 2008 to S$9.1 billion in 2018. Similarly, net profit attributable to shareholders grew from S$1.9 billion in 2008 to S$4.0 billion in 2018. Such performance is commendable considering the bank was already a huge company 10 years ago.
In term of its dividend track record, the bank has performed equally well. Since 2008, the dividend per share has risen from S$0.60 to S$1.20 in 2018. In other words, the dividends surged by 100% during the period.
At UOB’s current share price of S$24.41 each, it is trading at a trailing dividend yield of 4.1%.
No. 2: ComfortDelGro Corporation Limited
ComfortDelGro Corporation Limited (SGX: C52) is a transport company with operations mainly in Singapore, Australia, the United Kingdom, and China.
Similar to UOB, ComfortDelGro has consistently paid dividends for the last 10 years, growing its dividend per share from 5.3 Singapore cents in 2009 to 10.5 Singapore cents in 2018. What’s more, its dividend per share has grown every single year for the last 10 years.
ComfortDelGro is likely to face mixed prospects within its various businesses. On the one hand, its taxi business will continue to face heightened competition from ride-sharing companies like Grab. On the other hand, SBS Transit Ltd (SGX: S61) (ComfortDelGro’s Singapore-listed public transport business) is well-positioned to deliver sustainable income in the foreseeable future. Thus, it’s important for investors to weigh these factors when evaluating the sustainability of ComfortDelGro’s future dividends.
At ComfortDelGro’s latest share price of S$2.43, it has trailing dividend yield is 4.4%.
The Foolish bottom line
These are two blue-chip companies with above market average dividend yields.
Though these companies generally have stable business operations, investors shouldn’t take past performance as a guarantee of future performance. We can’t know for sure what might happen in the future.
Thus, it’s crucial for investors to evaluate the prospects of these companies before investing in them, especially since these companies can sustain their future dividends only through strong business performances.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of United Overseas Bank Ltd, VICOM Limited, and SBS Transit Ltd.
Motley Fool Singapore 2019