Going Beyond Sheng Siong Group Ltd's (SGX: OV8) 3.4% Dividend Yield
Sheng Siong Group Ltd (SGX: OV8) is a Singapore-grown supermarket chain with 64 outlets in Singapore. The company has also expanded into China to capture growth in that market.
Here, let’s learn more about Sheng Siong’s dividends, including factors such as its dividend yield, dividend history, and most importantly, the sustainability of the dividend.
Sheng Siong shares are currently selling at S$1.56 each, giving a dividend yield of 3.4%.
For perspective, the SPDR STI ETF (SGX: ES3) had a distribution yield of just below 4% on the same day. The SPDR STI ETF is an exchange-traded fund (ETF) that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (STI).
Dividend Amount And Payout Periods
Sheng Siong paid out a dividend of 3.55 Singapore cents per share for its financial year ended 31 December 2019.
The company’s annual dividend is usually split into two parts – one part (interim dividend) is given out for the second quarter and the other for the fourth quarter (final dividend).
For 2019, Sheng Siong dished out a dividend of 1.75 Singapore cents per share for the second quarter and 1.80 cents for the fourth quarter.
Sheng Siong has paid dividends every year since its initial public offering (IPO) in 2011.
This is how Sheng Siong’s dividend performance has been from 2014 to 2019:
|Year||Interim dividend per share (Singapore cents)||Final dividend per share (Singapore cents)||Total dividend per share (Singapore cents)|
Sheng Siong’s total dividends have increased from 3.0 Singapore cents per share in 2014 to 3.55 cents in 2019, giving an annual growth rate of 3.4%. The growth in dividend is above the average inflation rate in Singapore.
For its 2020 second-quarter, Sheng Siong increased its interim dividend to 3.50 Singapore cents, up 100% year-on-year.
The doubling of dividend comes on the back of Sheng Siong’s net profit for the first half of the year rising by 99.1%. The elevated demand arising from COVID-19 has certainly helped Sheng Siong.
Sheng Siong doesn’t have a formal dividend policy.
In its IPO prospectus, the company said that the declaration of dividends will depend on factors such as its operating results, financial condition, and cash requirements for capital expenditure.
To find out if a company’s dividends are sustainable, we can compare its earnings to the amount in dividends that it pays out.
Companies that pay less than 100% of their earnings have some room for error and have space for dividend growth in the future.
The following shows Sheng Siong’s earnings per share, total dividend per share, and dividend payout ratio (dividend as a percentage of earnings) since 2014:
|Earnings per share (Singapore cents)||3.34||3.78||4.17||4.64||4.71||5.04|
|Total dividend per share |
|Dividend payout ratio||89.8%||92.6%||89.9%||71.1%||72.2%||70.4%|
Sheng Siong’s dividend is well-covered, as it pays out below 100% of its earnings as dividends.
In terms of free cash flow, the supermarket chain dished out around 84% of it as total dividend for 2019, which is also prudent.
Having said that, Sheng Siong’s 2020 interim dividend was particularly high due to elevated demand (which peaked in April/May 2020) from the pandemic.
Since then, there has been more relaxation of COVID-19 restrictions with Singapore entering Phase 3 of re-opening on 28 December.
Taking Sheng Siong’s 2019 dividend per share of 3.55 Singapore cents and its current share price of S$1.56 as a conservative measure, Sheng Siong’s dividend yield falls to 2.3%.
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Disclaimer: 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.