4 Stocks This Week (Sustainable Dividends) [31 July 2021] SGX; Nikko AM STI ETF; Sheng Siong; DBS/OCBC/UOB

With July 2021 coming to an end, it's been a lot more than six months since the first COVID-19 case was confirmed in Singapore. Since then, the COVID-19 pandemic has disrupted the planet in a way no one could have anticipated. Global travel originates to a standstill and most countries all over the world (including Singapore) had to implement some form of lock-down and border controls so that they can stop the spread of the disease.

Around the world, more than 17 million people have been confirmed as have contracted COVID-19 with the United States (4.64 million), Brazil (2.67 million) and India (1.64 million) crossing the fir million mark. More than 670,000 people have died because of COVID-19.

As an open economy dependent on global trades, Singapore has been hard hit. Advanced estimates in the Ministry of Trade showed that on the quarter-on-quarter basis seasonally-adjusted basis, GDP have reduced by a record 41.2%. The Secretary of state for Manpower also announced the 2009 week that unemployment and retrenchment rates have raised between April to June, using the unemployment rate for Singaporeans currently standing around 4.0%.

Not surprisingly, stocks around the Singapore Exchange have been impacted. The Straits Times Index (STI) has fallen by about 22% since the start of the year.

Dividends have always been an important consideration for many Singapore investors when investing in local stocks. In this edition of 4 Stocks This Week, we look at the dividend payout of a number of Singapore's most prominent companies and recent announcements that they have made.

Singapore Exchange Limited (SGX: S68)

Besides being the stock market of Singapore, the Singapore Exchange (SGX) is another public-listed company within the Singapore Exchange that you could invest in.

Amid the challenging year for most companies around the world, the SGX announced a remarkable set of results for FY2021, as it saw both its revenue (S$1.05 billion, up 16% from the year ago) and net profit (S$472 million, up 21% from the year ago) increasing. Earning per share is at an impressive 44.1 cent for FY2021, an increase of 21% from FY2021.

With this impressive set of results, the SGX is also announcing a greater dividend payout of 8.0 cents per share for 4Q2021. This is an increase from the usual 7.5 cents its smart per quarter. Investors can get quarterly dividends of 8.0 cents per share, which contributes to 32.0 cents per year, an increase of about 7% from the current level.

Based on its current share price of 8.17 (as of 30 July 2021), the SGX is trading in a dividend yield of about 3.9% and a price-to-earnings ratio of 18.5. Share costs are down by about 7.8% because the start of the year.

Nikko AM STI ETF (SGX: G3B)

One of two ETFs in Singapore that tracks the STI, the Nikko AM STI ETF is a proxy to how well the whole Singapore stock market performs.

Similar to the STI, the Nikko AM STI ETF is down about 22% since the start of the year and is currently trading at 2.58. Based on an SGX report, dividend yield for that ETF is currently at 4.8%, which is slightly higher than usual because of the decline in share price. Having said that, dividend yield may be lower if companies that make up the STI start to reduce their dividend payouts for future periods.

DBS (SGX: D05); OCBC (SGX: O39) & UOB (U11)

We will cheat and make an exception for this article by grouping the 3 local banks – DBS, OCBC and UOB, right into a single 'stock' for the article.

On 29 July 2021, the Monetary Authority of Singapore (MAS) called on local banks to cap their dividends at 60% of FY2021, and also to offer shareholders the option of finding the dividends to be paid for FY2021 in scrip (i.e. shares) instead of cash.

According to MAS, “while the Local Banks' capital positions are strong, the dividend restrictions are a pre-emptive measure to bolster their resilience and capacity to support lending to businesses and people through an uncertain period ahead for the economy.”

In other words, MAS wants banks to hold on to more cash so the banks can better support individuals and businesses during this difficult period. MAS also mentioned the three local banks – DBS, OCBC & UOB, have agreed.

Based on their FY2021 dividend, here's just how much the banks would likely pay out in dividends for FY2021.

* For banks which have paid their first quarter dividend (i.e. DBS), the dividend restrictions and offering of dividends in scrip is going to be extended by another quarter until 1Q2021. The 60% cap will apply to the revised period, but would still be reference FY2021.

Not surprisingly, all three local banks saw their share prices. DBS stock price dropped from 20.44 (29 July) to 19.77 (30 July) after the announcement, OCBC dropped from 8.92 to eight.56 and UOB dropped from 20.03 to 19.39.

Sheng Siong (SGX: OV8)

Sheng Siong has done remarkably well in 2021, because of the increase in its sales as individuals Singapore increase their spending on grocery items for essential daily use when they stay at home more as compared to dining out. Its share price has increased by 35%, from 1.26 at the start of the year to 1.70 by 30 July 2021.

In addition to its capital appreciation, investors could be glad to know that Sheng Siong has announced an interim cash dividend of 3.5 cents per share, double the amount 1.75 cents paid last year for the same period. This is removed the back of the company seeing its net profit more than double in the second quarter, because it records a profit of $46.2 million, as compared to $18.4 million a year ago.

Whether the company continues with a similar 3.5 cents per share payout for that 2H2021 is anyone's guess. If it does, this would make Sheng Siong dividend yield at approximately 4.1% based on current share price.

It's worth noting that Sheng Siong has a strategy concentrating on opening supermarkets at locations inside the heartlands. This is a strategy that, in our opinion, is favourable in 2021 as people prefer doing food shopping at supermarkets that are closer to their homes.