When you buy a dividend stock, you want its dividends to be backed by a resilient business.
A strong business should be able to navigate through a crisis, continue to pay dividends and emerge relatively unscathed from the downturn.
In the last 12 years, we have had two major crises: the Global Financial Crisis (GFC) back in 2008-2009, and the current COVID-19 pandemic.
Not many companies can claim that they have navigated through these two crises with minimal adverse impact.
Even less can claim that they managed to continue paying dividends through both economic downturns.
The ability to continue paying dividends requires a business with a strong economic moat that can generate steady or growing free cash flow even during a crisis.
These are the attributes that you should look for when selecting companies for your investment portfolio.
Here are five businesses that continued to pay dividends through both the GFC and the current pandemic.
VICOM Limited (SGX: WJP)
VICOM is a leading provider of testing and inspection services.
Its vehicle inspection division provides mandatory inspections for cars, taxis and buses, while its non-vehicle inspection segment provides testing and inspection services for industries such as mechanical and biochemical.
From 2008 to 2009, VICOM continued paying out dividends.
In 2009, VICOM paid S$0.0295, higher than the S$0.023 paid out the year before.
Fast forward to today and the group declared a full-year 2020 dividend of S$0.0622, down from the S$0.096 paid out last year.
The ability of VICOM to carry on paying dividends, albeit lower than the previous year, attests to its market position and the consistency of its free cash flow generation.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited, or SGX, is Singapore’s sole stock exchange operator.
The group operates a platform for the buying and selling of a wide variety of securities such as stocks, bonds and derivatives.
SGX also provides listing, clearing and settlement services for businesses.
The bourse operator’s monopolistic position and its strong free cash flow generation have enabled it to continue paying out dividends through both crises.
For its fiscal year 2009 ended 30 June 2009 (FY2009), SGX paid out a dividend of S$0.26.
The group had paid out S$0.38 in dividends in the prior year.
For FY2020, SGX paid out a total dividend of S$0.305. For its fiscal 2021 first-half, the total dividend per share paid so far amounted to S$0.16.
Boustead Singapore Limited (SGX: F9D)
Boustead Singapore Limited, or BSL, is an engineering conglomerate with four key divisions: energy-related engineering, real estate solutions, geo-spatial technology and healthcare.
The group has been consistently paying out a dividend despite the cyclicality inherent in its oil and gas and property divisions.
BSL can do so as its CEO, Wong Fong Fui, emphasizes having a strong balance sheet and the importance of free cash flow.
For 2008 and 2009, the group paid out a dividend per share of S$0.05 and S$0.04, respectively.
For its fiscal year 2020 ended 31 March 2020, BSL paid out a S$0.03 per share dividend, matching what it paid in the previous fiscal year.
Haw Par Corporation Limited (SGX: H02)
Haw Par is also a conglomerate with four divisions, namely healthcare, property, leisure and investments.
The group is famous for its globally-renowned Tiger Balm brand of ointments and pain patches.
Its leisure division owns the Underwater World Pattaya in Thailand, while its investment division owns stakes in both United Overseas Bank Limited (SGX: U11) and UOL Group Limited (SGX: U14).
The group’s business generates significant amounts of free cash flow and it also receives annual dividends from its investments that help to boost its cash balance.
These attributes have enabled Haw Par to pay dividends through both downturns.
The annual dividend was kept constant at S$0.20 for both 2008 and 2009.
And for its latest fiscal year 2020, the group announced that the total dividend will remain flat from 2019 at S$0.30 per share.
Singapore Technologies Engineering (SGX: S63)
Singapore Technologies Engineering, or ST Engineering, is an engineering giant with two key divisions: commercial, and defence & public security.
The group provides a gamut of products and services in the areas ranging from satellite communications, smart cities, land systems and aerospace.
Its engineering expertise and strong track record have helped ST Engineering to maintain its resilience during crises.
For its fiscal year 2008 and 2009, the group paid out an annual dividend of S$0.158 and S$0.1328, respectively.
For its latest fiscal year 2020, dividend per share stood at S$0.15, unchanged from the prior year.
ST Engineering’s order book remains robust at S$15.4 billion as at end-2020 despite the pandemic, higher than the S$15.3 billion recorded at the end of 2019.
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Disclaimer: Royston Yang owns shares in VICOM, Singapore Exchange and Boustead Singapore.