Income investors always take notice when a company raises its dividend.
It gets even better when three blue chips in Temasek Holdings’ portfolio do so at the exact same time.
Temasek, a global investment company headquartered in Singapore, holds a 23.3% stake in Singapore Exchange (SGX: S68) via SEL Holdings.
It also owns 51% of ST Engineering (SGX: S63) and approximately 50% of Sembcorp Industries (SGX: U96).
While a bigger payout is always a welcome sight, the key question is whether each raise is actually built to last.
Can SGX’s dividend keep rising?
Singapore Exchange (SGX) recently reported its financial results for the fiscal year ending 30 June 2026 (FY2026).
Unlike the calendar-year reporting used by the other two companies, the exchange operates on a July-to-June fiscal calendar.
Net revenue climbed 13.9% year on year (YoY) to S$1.5 billion.
The Equities – Cash division grew 28.1% to S$502.9 million as daily average traded value for securities reached S$1.8 billion, a solid 34.9% increase.
Meanwhile, FICC revenue rose 17.0% to S$376.2 million, driven by record currency and commodity derivatives volumes.
Adjusted net profit increased 24.6% to S$759.5 million, excluding a S$53.4 million goodwill impairment on Scientific Beta.
The exchange declared a total FY2026 dividend of S$0.570 per share, up significantly from S$0.375 the previous year.
Ordinary dividends made up S$0.445 of that total, while the remaining S$0.125 came as a one-off special dividend.
SGX generated a healthy S$788.8 million in free cash flow for FY2026.
It held S$1.8 billion in cash against S$628.2 million in borrowings.
Looking ahead, management guided for quarterly dividend increases of 0.25 cents per share through FY2028, full debt repayment in FY2027, and medium-term revenue growth of 6% to 8% (excluding treasury income).
SGX generates more than enough free cash flow to cover its higher payout, and it sits comfortably in a net cash position.
Out of the three stocks highlighted here, this dividend raise looks the most durable.
Is ST Engineering’s dividend raise backed by earnings?
ST Engineering bumped up its latest quarterly dividend by 25% YoY.
The 2Q2026 interim dividend came in at S$0.05 per share, up from S$0.04 in 2Q2025.
This brought total dividends for 1H2026 to S$0.09, compared to S$0.08 a year ago.
The board has also planned a further interim dividend of S$0.05 for 3Q2026.
Revenue rose 11.1% YoY to S$6.6 billion for 1H2026, while net profit grew 27.1% to S$512.1 million.
Earnings growth outpaced revenue across all three operating segments, while free cash flow improved to S$591.6 million from S$484.6 million a year earlier.
Net finance costs also fell 14.9%.
Commercial Aerospace revenue jumped 15% YoY, supported by higher engine MRO, nacelles, and spares sales.
Urban Solutions & Satcom saw operating profit rise fourfold as rail and tolling project deliveries picked up speed.
Crucially, the group’s order book hit a record S$35.7 billion, with roughly S$5.7 billion expected for delivery over the rest of 2026.
That substantial backlog provides solid visibility, backing the dividend raise with several years of contracted revenue.
Is Sembcorp’s dividend increase sustainable?
Sembcorp Industries raised its interim dividend by 22% YoY to S$0.11 per share.
Revenue rose 28% to S$3.8 billion for 1H2026.
These results consolidated one month of contribution from Alinta, which Sembcorp acquired on 1 June 2026 for S$5.1 billion.
Net profit, however, fell 72% YoY to S$150 million.
The group absorbed S$155 million in Alinta transaction costs and no longer had the benefit of prior-year divestment gains.
Stripping those out, underlying net profit declined 25% to S$369 million.
Free cash flow turned to negative S$39 million, compared with a positive S$241 million a year ago.
Total borrowings climbed from S$9.0 billion at end-2025 to S$15.2 billion following the Alinta acquisition.
As of 30 June 2026, the group held S$1.3 billion in cash.
Operationally, weaker wind and solar resources in China and India weighed on renewable output.
Lower vesting volumes and softer spark spreads in Singapore hit gas earnings, while gas curtailment at an associate company added further drag.
Management expects a stronger performance in the second half.
A new 600 MW hydrogen-ready plant and a full six-month contribution from Alinta should help steady the ship.
While the dividend hike reflects management’s confidence in Alinta’s long-term payoff, the actual cash flow to back it up hasn’t quite arrived yet.
Get Smart: Follow the Cash, Not Just the Payout
The next time a company announces a dividend raise, ask yourself one simple question: Can its free cash flow easily cover the higher payout?
A raise backed by strong free cash flow is anchored in cash the business is already generating today.
A raise that outpaces cash flow relies heavily on tomorrow’s growth arriving right on schedule.
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Disclosure: The Smart Investor owns shares of SGX.
