SATS Ltd (SGX: S58), or SATS, announced an interim dividend of S$0.02 per share in November 2025, leaving income investors feeling “FOMO” (fear of missing out) from this higher dividend yield.
But is SATS’s upside priced in or can you still buy the stock?
Understanding SATS: Business Model and Why Dividend Policy Matters
First, let’s take a look at how SATS makes money: the company operates in the air travel and tourism industry, providing ground-handling services for airports, in-flight and on-ground food solutions, as well as handling cargo.
Needless to say, the company’s turnover and earnings are influenced by travel (which influences the amount of air cargo handled), airport activity and the cost of food.
For a cyclical business, the consistency of its dividend payments, rather than large hikes that capture the headlines, matters more for SATS.
The Payout Upgrade: What Changed and What It Signals
As mentioned earlier, the interim dividend of S$0.02 per share represents a 33% hike from the prior year’s S$0.015 per share.
This dividend hike could be a reflection of how management currently views the outlook for the business.
In other words, SATS is increasingly confident in the strong travel recovery post-COVID, which should result in higher volumes in air cargo and passenger travel; both are boons for its business.
Moving forward, especially with the focus on cost management, SATs could continue its recent operating momentum in terms of strong turnover and positive cash flows.
What the Dividend Hike Actually Means (and What It Doesn’t)
Let’s be clear on what this recent hike means and what it doesn’t.
This highlights management’s confidence in the company’s recent improving fundamentals, with the potential of perhaps achieving the net margins seen pre-pandemic.
However, do not be mistaken that this is a guarantee that earnings will remain high, or that this high yield will be sustained.
The worst thing you can do is extrapolate this one-time hike to time immemorial.
SATS remains a cyclical business, reliant on the continued strength of air travel.
It is still prey to higher cost inflation and an economic slowdown, which could hamper its earnings, leading to possible dividend cuts.
Do remember that in the past five years, it did not pay an annual dividend for three years due to the adverse travel reduction (COVID).
Is It Too Late to Buy? A Reality Check on Valuation and Expectations
The question remains: is the stock still worth buying?
Since the company announced its dividend hike, shares have increased by 9%.
At a share price of S$3.40 per share, SATS is trading at a trailing price-to-earnings (P/E) ratio of 22.3 times.
Over the last twelve months (LTM), its dividend yield stands at 1.4%, which is significantly below its decade average of 3%.
Notably, SATS did not pay an annual dividend for three years due to COVID.
Looking forward, the key questions are, can this travel demand continue?
Also, can SATS continue reducing their costs, given competitive pressures?
If all’s good, and SATS can reclaim its pre-COVID price of S$5 per share, that would represent a capital appreciation of roughly 28%.
However, you have to weigh this against the possible headwinds mentioned earlier.
What to Watch Before Buying: Key Risk Factors & What to Monitor
If you do decide to purchase SATS now, be mindful of the global and regional travel cycles and oil prices.
Higher inflation will also eat into its food solutions margins and contribute to higher manpower costs.
Do also pay attention to possible supply-chain disruptions and regulatory changes.
SATS pays dividends semi-annually.
The company’s current dividend payout ratio of 31.6% is manageable.
SATS’ debt levels of S$2.45 billion should be a factor to consider.
Get Smart: A 33% Dividend Hike Does Not Mean It’s an Automatic Buy
To sum up, while its recent 33% dividend hike is appreciated, you should always look beyond the headlines.
Pay attention to its long-term fundamentals; focus on its business model and the sustainability of its cash flows.
For a cyclical name like SATS, you should pay attention to possible upcoming risks.
Given its current share price, SATS presents an attractive option only if you are comfortable with its cyclical risks.
It almost feels like the government is paying companies to make you wealthier. Singapore’s new S$5 billion market boost could send fresh money into local stocks. We identified 5 companies positioned to benefit, including familiar names with surprising wealth potential. Our free report reveals these hidden opportunities before the money flows in. Download it now before it’s too late.
Follow us on Facebook, Instagram and Telegram for the latest investing news and analyses!
Disclosure: Wilson.H does not own shares of any companies mentioned.
