It’s natural for investors to seek stability and reliability when times get tough.
Large, well-capitalised companies with a stellar track record qualify as suitable investment candidates should a downturn hit the economy.
These names may not be blue-chip stocks, but they do possess either a strong franchise/brand or a natural monopoly that enables them to continue generating healthy profits and cash flow.
For income-seeking investors, their focus is on the dividends that such stocks pay out.
A combination of dependability and a high dividend yield are attractive traits that this category of investors seeks.
We throw the spotlight on three billion-dollar businesses that offer dividend yields of 5% or more.
Hong Leong Finance (SGX: S41)
Hong Leong Finance, or HLF, is Singapore’s largest finance company with a network of 28 branches and 12 SME (small and medium enterprises) centres island-wide.
HLF’s core business involves accepting deposits and savings from the public and providing corporate and consumer loans.
The group reported a sparkling set of earnings for 2022, with net interest income (NII) jumping 36.1% year on year to S$242.2 million.
Fee and commission income climbed 46.3% year on year to S$16.4 million.
With total operating expenses rising by just 13.1% year on year, operating profit before allowances surged by 56.7% year on year to S$159.9 million.
Net profit soared 54.3% year on year to S$130.9 million.
HLF has proposed a final dividend of S$0.1325, up 60.6% year on year from 2021’s final dividend of S$0.0825.
Together with the finance company’s 2022 interim dividend of S$0.0375, the total dividend for 2022 came up to S$0.17.
Shares of the group provide a trailing dividend yield of 6.9%.
With the US Federal Reserve poised to increase interest rates further, HLF should continue to enjoy a tailwind for its NII.
The business continues to support its SME clientele by providing financial support and solutions.
It rolled out a new working capital financing product called BizCap Loan to help improve SMEs’ liquidity while also offering higher deposit rates to individuals to grow their savings.
NetLink NBN Trust (SGX: CJLU)
NetLink NBN Trust designs, builds, owns and operates the fibre network infrastructure of Singapore’s next-generation nationwide broadband network (NBN).
The Trust’s network owns the only nationwide residential fibre network coverage in Singapore, giving it a natural monopoly.
Back in 2018, NetLink NBN Trust already held an 80% household penetration rate.
Since its fiscal 2020 (FY2020) ending 31 March 2020, residential fibre connections have increased from 1.43 million to 1.48 million as of the third quarter of fiscal 2023 (3Q FY2023).
Non-residential connections have increased from 47,700 to 52,100 over the same period while non-building address points have jumped from 1,679 to 2,624.
NetLink NBN Trust reported a resilient set of numbers for the first nine months of fiscal 2023 (9M FY2023).
Revenue rose 6.5% year on year to S$299.8 million while net profit climbed 24.2% year on year to S$81.8 million.
The fibre group saw its distribution per unit (DPU) rise from S$0.0488 in FY2019 to S$0.0513 in FY2022.
The first half of FY2023 saw DPU come in at S$0.0262, bringing annualised DPU to S$0.0524.
NetLink NBN Trust’s units offer a forward distribution yield of around 6.2%.
StarHub Ltd (SGX: CC3)
StarHub is a telecommunication company (telco) that provides mobile, broadband, and pay-TV services.
The telco reported a mixed set of earnings for 2022.
While revenue saw a near-14% year on year increase to S$2.3 billion, operating profit fell by a third year on year to S$154.7 million.
Net profit plunged 58.3% year on year to S$62.2 million, partly contributed by the impairment losses of nearly S$60 million from the shutdown of StarHub’s legacy infrastructure and the discontinuation of one of Strateq’s business lines.
StarHub paid out a total dividend of S$0.05 for 2022, giving its shares a trailing dividend yield of 5%.
The good news is that the telco’s dividend policy pledges to distribute the higher of S$0.05 or 80% of its net profit (after adjusting for one-off, exceptional items).
Hence, the S$0.05 will be the floor for StarHub and investors can look forward to a higher dividend should operating conditions improve.
For 2023, the group intends to continue with its DARE+ transformation initiatives and also increase its investments to S$310 million as part of its cloud network shift.
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Disclosure: Royston Yang owns shares of NetLink NBN Trust.