Many companies pay a dividend, but not all dividend companies are attractive to own.
A great dividend stock is one that not only generates a decent dividend yield but is also able to sustain its dividend payments.
Companies with certain key attributes make them more likely to sustain and even grow their dividend payouts in the future.
An effective way to start looking is to start by identifying industries or market sectors that have favourable economic characteristics.
This approach helps greatly if these industries are also able to catch the tailwinds of an enduring growth trend.
Another approach would be to seek dominant industry players that are able to protect their profits for years to come.
With that in mind, here are three stocks that you want for your watchlist.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is Singapore’s first pure-play data-centre REIT with a portfolio of 18 data centres as of 30 June 2020.
The REIT’s data centres are located in 11 cities within eight countries and take up nearly 2 million square feet of net lettable area.
Being a REIT means that 90% or more of its distributable income has to be paid out to unitholders, making it a stable dividend payer.
Meanwhile, Keppel DC REIT has steadily grown its portfolio through acquisitions from S$1 billion at IPO in December 2014 to S$2.8 billion as of today.
As the REIT’s portfolio grew, its distribution per unit (DPU) has also grown in tandem, rising from S$0.0614 in 2016 to S$0.0761 in 2019.
For the first half of 2020, the REIT announced a DPU of S$0.04375, translating to an annualised DPU of around S$0.0875, or around a 15% year on year increase from 2019.
Keppel DC REIT is riding high on the massive growth in data usage brought about by the COVID-19 pandemic.
The global data centre colocation market is expected to grow by 15% year on year in 2020, while global mobile data traffic is poised to increase by 31% annually from 2019 to 2025.
These trends will underpin steady growth for the REIT’s DPU and also provide more assurance on the sustainability of its dividend payments.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited, or SGX, is Singapore’s sole stock exchange.
The group operates a platform for the buying and selling of a wide range of securities, including equities, fixed income, derivatives and currencies.
SGX’s monopoly status enables it to command a strong competitive moat that sustains its core business and allows it to generate consistent free cash flows.
This cash flow consistency, in turn, allows the group to pay out a sustainable and increasing dividend to investors.
Since the fiscal year 2012 (the group has a 30 June year-end), SGX has either maintained or increased its dividend.
Dividend per share (DPS) was S$0.27 in 2012 and has increased to S$0.30 by the fiscal year 2019.
Last week, the bourse operator released its fiscal year 2020 earnings and reported a 16% year on year rise in revenue and strong 21% year on year jump in net profit.
SGX’s quarterly dividend was raised from S$0.075 to S$0.08 in the fourth quarter, bringing its annualised DPS up to S$0.32 from the fiscal year 2021 onwards.
SGX’s acquisitions of both Scientific Beta and BidFX, as well as its evolution into a multi-asset exchange, should allow DPS to be sustained and perhaps, even increased in future.
iFAST Corporation Limited (SGX: AIY)
iFAST Corporation Limited is a financial technology (fintech) company that operates a platform for the transacting of unit trusts, equities and fixed income securities.
The group earns its revenue through platform fees, wrap fees and trailer fees, and manages assets under administration (AUA) of S$11.15 billion as of 30 June 2020.
Last year iFAST paid out a total DPS of S$0.0315. For the first half of 2020, it has kept its dividend payments unchanged.
The group has done remarkably well, though.
For the first half of 2020, it reported a 23% year on year increase in net revenue, while net profit doubled year on year to S$8.16 million.
The pandemic has led to a record inflow of client assets amounting to S$1.25 billion, thereby pushing AUA up to its highest level ever.
The group continues to see strong fund inflows, and its strong track record as one of the first fintech companies in Singapore should provide stability to its dividend payments.
Get Smart: Dividends for life
There are good reasons for wanting to invest in strong dividend stocks.
Once found, you can hold them for years, even decades, as they continue to churn out a passive source of cash that goes straight into your bank account.
By holding for the long term, we do not need to find new companies to invest in. At the same time, we benefit from growing our cash inflow to beat inflation.
A double benefit, no doubt, to add on to the peace of mind you receive knowing that you own a portfolio of attractive dividend stocks.
Download your FREE special REITs report: “How You Can Make Money Investing In REITs During This Pandemic” HERE or in the box below!
We cover the pandemic’s impact on REITs in Singapore, and dive into the different sectors of Hospitality REITs, Retail REITs, Commercial REITs, Industrial REITs, Healthcare REITs.
Disclaimer: Chin Hui Leong owns shares in iFAST Corporation Limited, Singapore Exchange Limited and Keppel DC REIT.