While dividend stocks provide a steady income for retirement, it is important that these companies are able to grow their profits to sustain a growing dividend in order to beat inflation.
The following three stocks offer both attractive yields and robust growth.
If this growth continues, shareholders can expect to be rewarded with higher dividends in the coming years.
HRnetGroup Limited (SGX: CHZ)
HRNetGroup Limited is the biggest recruitment agency in the Asia Pacific region outside of Japan.
The company derives its revenue from flexible staffing and professional recruitment services and operates through key brands such as Recruit Express and Recruit First.
Over the last four years, the group has diversified its businesses into Hong Kong, Taiwan, United Kingdom, Ireland and Indonesia.
The company experienced a tough 2020 due to the COVID-19 pandemic as companies tightened expenses and business hiring slowed down drastically.
However with the ongoing vaccination drive across the region, economies are slowly recovering, barring another major outbreak.
ManpowerGroup’s latest Employment Outlook Survey revealed that Singapore employers were intending to hire more staff between July to September 2021.
In this period, the net employment outlook saw an improvement of 43 percentage points from a year ago, when COVID-19 first had an impact on hiring sentiment.
The brighter hiring prospect bodes well for the group’s businesses.
For its fiscal year 2020 (FY2020), the group declared a dividend of S$0.025 per share, which translates to a 3.1% yield at a share price of S$0.80.
The company has a dividend policy of paying out 50% of net profits to shareholders.
The dividend is well supported by its cash hoard of S$332.2 million with no debt.
CSE Global Limited (SGX: 544)
CSE Global Limited is a leading systems integrator targeting the oil and gas, petrochemical, utilities, public infrastructure, environmental and healthcare industries.
In spite of uncertain market conditions and macroeconomic headwinds, CSE has achieved commendable performance.
The group enjoyed an 11.3% growth in revenue from S$451.8 million in FY2019 to S$502.8 million in FY2020 and a 16.4% surge in net profit after tax from S$24.1 million to S$28.0 million over the same period.
The Group’s gross and net profit margins for FY2020 were relatively stable at around 29.1% and 5.6%, respectively..
The Group continues to generate strong cash from operations of S$40.1 million in FY2020.
While the group has a net debt of S$39.0 million for FY2020, net gearing remained low at 20.3%, with adequate headroom for working capital requirements.
In July 2021, the Group announced it had secured S$104.4 million in new orders for 2Q 2021, bringing its order book to S$212.1 million as at the end of the quarter.
The outlook of the Group remains bright with a robust order book, stable margins and steady flow business from its existing installed base’s maintenance, system enhancement and upgrades and small greenfield orders.
CSE had been paying S$0.0275 per share in dividends to shareholders since FY 2016.
This translates to about a 5.3% yield at a share price of S$0.52.
The dividend payout ratio, meanwhile, had dropped to 50% in FY2020 from 67% in FY2016.
Long-term shareholders can expect higher dividends in future years as the group benefits from the reopening of the economies and a growing order book.
NetLink NBN Trust (SGX: CJLU)
NetLink NBN Trust designs, builds, owns and operates the passive fibre network infrastructure (comprising ducts, manholes, fibre cables and Central Offices) of Singapore’s Next Gen NBN.
NetLink’s extensive network provides nationwide coverage to residential homes and non-residential premises in mainland Singapore and its connected islands.
NetLink NBN has a resilient business model with over 95% broadband residential penetration rate in broadband delivery in Singapore.
The business generates recurring, predictable cash flows supported by long-term contracts.
The pandemic in 2020 has accelerated digitalisation trends, leading to a boom in e-commerce and more lessons and work meetings being conducted virtually.
NetLink stands ready to capitalise on these tailwinds and plays a vital role in providing the underlying fibre infrastructure that enables the delivery of ultra-high-speed internet access throughout Singapore.
The company paid out a full year 2020 dividend of S$0.0508, which translates to a 5.2% yield at a share price of S$0.97.
Get Smart: Resilient and willing to pay dividends
The above three companies have resilient business models and generate consistent free cash flow.
These characteristics support the payment of dependable dividends.
For investors who wish to sleep well at night, they can consider adding these gems to their watchlists.
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Disclaimer: Sunny Tan owns shares of HRnetGroup and CSE Global Limited.
