There are good reasons why blue-chip companies are often favoured by investors.
For one, they usually have a strong track record of delivering growth over the years.
Another factor is their resilience and stability through various economic cycles.
The deal gets even sweeter if the stock pays out a dependable dividend.
Singapore Technologies Engineering Ltd (SGX: S63), or STE, certainly fits the bill.
The technology, defence and engineering conglomerate have been a bastion of stability throughout the pandemic.
Serving customers in more than 100 countries, the group not only boasts a stellar track record but has also reported a decade-high order book.
Should investors include STE in their investment watchlist?
A healthy set of financial numbers
The engineering group reported a good set of numbers for its fiscal 2021 (FY2021) earnings.
Revenue increased by 7.5% year on year to S$7.7 billion while profit from operations jumped by 13.3% year on year to S$645.9 million.
Net profit rose 9.3% year on year to S$570.5 million, with the group’s return on equity coming in at 23.6%.
A final dividend of S$0.10 was declared, bringing total FY2021 dividends to S$0.15 per share.
STE has paid a constant dividend of S$0.15 per share since FY2016.
Its shares offer a trailing dividend yield of 3.7% at the last traded share price of S$4.05.
Still capturing contracts
Despite tough conditions, the group still managed to capture S$3.2 billion worth of new contracts in the fourth quarter of 2021 (4Q2021).
Of this amount, more than half was for the defence & public security division and involved the supply of cybersecurity products and solutions as well as munitions for international customers.
Meanwhile, the commercial aerospace division clinched S$1 billion worth of contracts to perform airframe maintenance and also maintenance, repair and overhaul (MRO) services for Asian airlines.
The remaining S$400 million was for the urban solutions and satcom (i.e. satellite communications) division to provide smart utilities and satcom ground infrastructure.
STE’s order book was at a decade-high of S$19.3 billion and was 26% higher than the end-2019 order book level of S$15.3 billion.
The group’s acquisition of TransCore in October last year is set to improve its smart city ambitions and grow its order book further, providing higher revenue visibility for investors.
Well-planned strategic objectives
Recall that STE has announced a major restructuring of its divisions in late-2020 as part of its revamp to adopt a leaner corporate structure.
Almost a year later, the group laid out a set of strategic objectives during its Investor Day presentation.
It unveiled a new five-year plan where it aims to grow its annual revenue at double to triple the global GDP growth rate to hit more than S$11 billion by 2026.
With FY2021’s revenue at S$7.7 billion, this is a lofty target for management.
The group may already have a game plan for moving towards this target through a combination of acquisitions and organic growth.
A quarterly dividend policy
To sweeten the deal for investors, STE has approved a dividend policy that will distribute dividends every quarter instead of half-yearly.
This makes the engineering giant one of the few non-REIT companies on the local exchange that pays out quarterly dividends.
Receiving dividends more often is beneficial for investors as it allows them to reinvest these dividends sooner to hasten the compounding process.
In addition, the group has also raised its annual dividend to S$0.16 per share, with S$0.04 to be paid every three months.
With this increase, STE’s prospective dividend yield now improves to 4%.
Get Smart: More good news to come
STE has a lot going for it — not only has it reported a steady increase in its order book, but the group has also managed to clinch contracts during a difficult economic environment.
Its steady financials and dividend-paying track record should also stand it in good stead as a rock-solid business that investors can rely upon through good times and bad.
There could be more good news for the group as it leverages its capabilities to garner more contracts, thereby taking its order book to new heights.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
