The Straits Times Index (STI) component stocks are essentially blue chip stocks.
I was quite taken aback when I saw the index dividend yield was almost 5% as of the market close on 20 Mar 2020!
See below for the STI ETF with a dividend yield of 4.94% and a PE ratio of 9.
Dividend Yield is a crude way to tell us whether a stock is cheap or expensive. Simply refer to the formula below.
For the yield to be high, either the dividends per share has to be high or the share price has to be low.
Given that the dividends per share has been stable and only changes once a year, the spike in dividend yield among the blue chips has to be due to lower share prices.
But of course we can argue that the market is pricing in the poorer business sentiments in advance. The dividend yield would fall when the businesses distribute lower dividends per share in the future.
Hence, it depends on how pessimistic you are about future earnings after the Covid-19 impact. Since we cannot know exactly how it will turn out and where is the bottom, some of you might be considering dollar cost average the high yielding blue chips.
Dividend yields are not everything so please do not rely on it solely to make your investment decisions.
Here are 18 blue chips that are yielding more than 5% as of the market close on 20 Mar 2020.
#18 – Venture Corp: 5% dividend yield
- Price = $13.98 (20 Mar 2020)
- Dividend Yield = 5.0%
- Free Cash Flow Yield = 5.1%
- Payout Ratio = 0.6
- PE = 11
- PB = 1.6
#17 Mapletree Com Trust: 5.2% dividend yield
- Price = $1.77 (20 Mar 2020)
- Dividend Yield = 5.2%
- Free Cash Flow Yield = 4.5%
- Payout Ratio = 1
- PE = 9
- PB = 1.1
#16 Dairy Farm: 5.3% dividend yield
- Price = $3.97 (20 Mar 2020)
- Dividend Yield = 5.3%
- Free Cash Flow Yield = 19.3%
- Payout Ratio = 0.9
- PE = 17
- PB = 4.4
#15 Yangzijiang SGD: 5.4% dividend yield
- Price = $0.835 (20 Mar 2020)
- Dividend Yield = 5.4%
- Free Cash Flow Yield = 24.6%
- Payout Ratio = 0.3
- PE = 5
- PB = 0.5
#14 Hongkong Land USD: 5.7% dividend yield
- Price = $3.90 (20 Mar 2020)
- Dividend Yield = 5.7%
- Free Cash Flow Yield = 11.4%
- Payout Ratio = 2.6
- PE = 46
- PB = 0.2
#13 Mapletree Log Trust: 5.8% dividend yield
- Price = $1.38 (20 Mar 2020)
- Dividend Yield = 5.8%
- Free Cash Flow Yield = -12.4%
- Payout Ratio = 1
- PE = 11
- PB = 1.2
#12 CapitaCom Trust: 6.0% dividend yield
- Price = $1.49 (20 Mar 2020)
- Dividend Yield = 6.0%
- Free Cash Flow Yield = 5.9%
- Payout Ratio = 1
- PE = 13
- PB = 0.8
#11 Jardine C&C: 6.0% dividend yield
- Price = $18.60 (20 Mar 2020)
- Dividend Yield = 6.0%
- Free Cash Flow Yield = 14.1%
- Payout Ratio = 0.4
- PE = 6
- PB = 0.8
#10 OCBC: 6.3% dividend yield
- Price = $8.36 (20 Mar 2020)
- Dividend Yield = 6.3%
- Free Cash Flow Yield = 21.3%
- Payout Ratio = 0.5
- PE = 7
- PB = 0.8
#9 Ascendas REIT: 6.4% dividend yield
- Price = $2.51 (20 Mar 2020)
- Dividend Yield = 6.4%
- Free Cash Flow Yield = -6.4%
- Payout Ratio = 1.1
- PE = 16
- PB = 1.2
#8 SATS: 6.4% dividend yield
- Price = $2.96 (20 Mar 2020)
- Dividend Yield = 6.4%
- Free Cash Flow Yield = 7.6%
- Payout Ratio = 0.9
- PE = 13
- PB = 2.0
#7 SPH: 6.6% dividend yield
- Price = $1.81 (20 Mar 2020)
- Dividend Yield = 6.6%
- Free Cash Flow Yield = 8.9%
- Payout Ratio = 0.9
- PE = 14
- PB = 0.8
#6 ComfortDelGro: 6.7% dividend yield
- Price = $1.46 (20 Mar 2020)
- Dividend Yield = 6.7%
- Free Cash Flow Yield = 3.1%
- Payout Ratio = 0.7
- PE = 12
- PB = 1.2
#5 CapitaMall Trust: 6.7% dividend yield
- Price = $1.78 (20 Mar 2020)
- Dividend Yield = 6.7%
- Free Cash Flow Yield = 5.4%
- Payout Ratio = 1
- PE = 9
- PB = 0.8
#4 DBS: 6.8% dividend yield
- Price = $18.16 (20 Mar 2020)
- Dividend Yield = 6.8%
- Free Cash Flow Yield = 18.7%
- Payout Ratio = 0.5
- PE = 7
- PB = 0.9
#3 UOB: 6.9% dividend yield
- Price = $18.96 (20 Mar 2020)
- Dividend Yield = 6.9%
- Free Cash Flow Yield = 24.8%
- Payout Ratio = 0.5
- PE = 7
- PB = 0.8
#2 Genting Singapore: 6.9% dividend yield
- Price = $0.58 (20 Mar 2020)
- Dividend Yield = 6.9%
- Free Cash Flow Yield = 12.9%
- Payout Ratio = 0.7
- PE = 10
- PB = 0.9
#1 Singtel: 7.3% dividend yield
- Price = $2.41 (20 Mar 2020)
- Dividend Yield = 7.3%
- Free Cash Flow Yield = 8.3%
- Payout Ratio = 0.9
- PE = 13
- PB = 1.3
P.S. STI plunged another 9% on 23 Mar 2020 at the time of writing. This would likely caused the dividend yields to spike up even more. The overall STI dividend yield would likely cross 5%.
Hi Alvin, thanks for your sharing. May i pls know what is the significance of your Free Cash Flow Yield & how is it calculated?
free cash flow is the amount of cash the business can generate after paying for all the operating and maintenance cash expenses in the company. Investors typically use free cash flow to check against the dividends given. The former should be greater than the latter.
Free cash flow = operating cash flow – capital expenditure.
Free cash flow yield = free cash flow / mkt cap
Dividend yield is irrelevant if most companies do not issue them in the next year.
Hi DW,
Can we ask how was Singtel P/E of 13 derived?
Most sites are showing P/E of around 30+
🙂
They use trailing PE (last 12 months earnings). I use historical PE, based on the EPS in the last annual report.
At this roller coaster & pandemic time, what’s a good buy? When’s the best time to enter the market?
There’s not answer to this. Really depends on your goal is short or long term
Div yield is now artificially inflated by the sharp drop in stock prices. If a stock was yielding 5% before the pandemic and has now lost 30% of its value, then can we reasonably assume next dividend (per share) amount would be similar to the last dividend amount, making a 7% dividend yield?
No we can’t assume that. I would say dividend might remain at the previous level, but more likely it would drop. Therefore, using a fallen price to derive a high dividend yield is wishful thinking, and misleading, unless you have reason to believe the fundamentals of the company remains unchanged so the company has enough cashflow to keep the dividend amount.
Few companies have such strength