Union Gas Holdings Ltd (SGX: 1F2) is an established provider of fuel products in Singapore with over 40 years of operating track record.
It has three key business segments: Liquefied Petroleum Gas (LPG) , Natural Gas, and Diesel.
It is one of the leading suppliers of bottled LPG cylinders to domestic households in Singapore.
The company also produces, sells and distributes compressed and piped natural gas to motorists and industrial customers.
The diesel segment sells and distributes diesel to retail customers at its fuel stations, as well as transports, distributes and bulk sells diesel to commercial customers.
The company has grown steadily over the years and is expanding its businesses to continue to deliver returns to its shareholders.
Investors who enjoy steady dividends may want to consider picking up shares of the company for three straightforward reasons.
1. Trusted Brand and long history of operation
With over 40 years of operating history in Singapore, Union Gas has established trusted brands widely recognised by customers in Singapore.
Its extensive distribution network and capabilities mean potential competitors will find it difficult to disrupt its businesses.
2. Steady and growing business
In the fiscal year 2020 (FY2020), the company’s revenue grew 9.4% year on year to S$86.2m while net profit surged by 64.7% year on year to S$13.9 million.
This growth was led by its LPG segment which benefited from the COVID-19 restrictions and measures imposed by the Singapore Government as households are cooking and eating more at home.
Over the five-year period from 2016 to 2020, revenue has grown from S$35.7 million to S$86.2 million (for a compound annual growth rate of 9.2%), while net profit has grown from slightly faster at 13.3% per annum from S$4 million to S$13.9 million.
To drive growth in the business, the company is planning to explore new products and markets.
3. A rock-solid balance sheet
As of 31 December 2020, the company has about S$34.2 million in cash and cash equivalents on its balance sheet and has no long-term debt.
This translates to about 13.4% of its market cap of S$254.1 million as of 9 July 2020.
The company has a dividend policy of returning at least 50% of its profits to shareholders.
In 2020, it paid S$0.0303 per share in dividends, which translates to a dividend yield of 2.7%.
With a steady recession-proof business and decent yield, investors can enjoy peace of mind collecting their dividends in this highly volatile market.
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Disclosure: Sunny Tan owns shares of Union Gas.
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