Investors love owning a stock with a great dividend yield.
However, it’s important to remember that a high yield is useless if the company cannot sustain it.
The ideal situation is for a stock to pay out a reasonably high dividend yield that can be supported over the medium term.
Stocks with yields that are too good to be true may turn out to be value traps.
Because of this, you should look out for companies with dividend yields in the 3% to 6% range.
In evaluating if the dividend can be maintained or even increased, you need to look at the industry the company is in and the status of the business.
Here are three stocks that sport a sustainable dividend yield of 5% or more.
NetLink NBN Trust (SGX: CJLU)
NetLink NBN Trust is part of the NetLink Group, which designs, builds, owns and operates the fibre network infrastructure of Singapore next-generation nationwide broadband network (NBN).
The business trust’s network provides internet connectivity for homes as well as commercial premises.
For its fiscal 2022 half-year (1H2022) ended 30 September 2021, NetLink NBN Trust reported a 3.6% year on year increase in revenue to S$187.9 million.
The increase in revenue is due to higher residential and segment connections and an increase in installation-related and diversion revenues.
However, net profit declined by 10.5% year on year due to an accounting entry related to rental rate reductions when the group renewed its central office lease agreements with its lessee.
Despite the decline, distribution per unit (DPU) inched up by 1.2% year on year to S$0.0256.
Annualised DPU stands at S$0.0512, translating to a forward dividend yield of 5.1% at the last traded price of S$1.01.
NetLink NBN Trust’s residential fibre connections continues to increase from 1,447,000 as of 31 March 2021 (FY2021) to 1,451,000 at the end of 1H2022.
Non-residential fibre connections increased by 1,000 to 49,100 over the same period.
The group expects to maintain its distributions as its business model remains resilient and is underpinned by predictable revenue streams from residential and non-residential connections.
It will also explore opportunities to invest in overseas telecommunication infrastructure businesses.
CSE Global (SGX: 544)
CSE Global is a specialist engineering firm that designs and builds customised, integrated systems for their clients in the energy, infrastructure, and mining sectors to solve their problems.
The group has a presence in 16 countries and employs 1,400 staff globally.
For its fiscal 2021 first half (1H2021), revenue declined by 8.3% year on year to S$234.4 million due mainly to project delays in the Americas region.
Net profit slumped by 33% year on year to S$10 million, but new orders received as of 1H2021 remained healthy at S$210.6 million despite the slowdown.
An interim dividend of S$0.0125 was declared, bringing the trailing 12-month dividend to S$0.0275.
CSE Global has maintained its annual dividend of S$0.0275 for the last five fiscal years, and it shows the ability to do so this year, too.
At the last traded share price of S$0.51, its shares are offering a dividend yield of 5.4%.
The group reported an encouraging level of new orders for its third quarter (3Q2021) totalling S$120.3 million, higher than the S$91 million chalked up in the same period last year.
CSE Global is also committed to acquisitions as a key growth strategy, and its focus areas will be the energy and infrastructure segments in the USA, Europe, Australia and New Zealand.
Valuetronics Holdings Limited (SGX: BN2)
Valuetronics is an electronic manufacturing service provider that helps its customers to design and develop a range of products.
The group has manufacturing facilities located in Guangdong province in China and also in Vinh Phuc province in Vietnam.
For its fiscal 2021 (FY2021) ended 31 March 2021, Valuetronics reported a slight 3.1% year on year decline in revenue to HK$2.3 billion.
The decline was due to a 25.7% year on year fall in revenue for its Consumer Electronics division as a key customer experienced a fall in demand.
The decrease was offset by a 11.3% year on year rise in revenue for its Industrial and Commercial Electronics division.
Despite the reduced revenue, net profit inched up by 4.6% year on year to HK$187.1 million.
The group paid out a total FY2021 dividend of HK$0.21, which translates to a trailing dividend yield of around 6.1% at Valuetronics’ last traded share price of S$0.60.
Valuetronics’ Vietnam campus is slated to commence mass production by the first quarter of the calendar year 2022.
However, the group warned that supply chain issues and a loss of orders resulting in customers switching to non-Chinese suppliers could impact results for its next fiscal year.
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Disclaimer: Royston Yang owns shares of NetLink NBN Trust.