ST Engineering (SGX: S63) announced a special dividend which has placed the stock back in the spotlight.
Special dividends have a way of doing that.
They create urgency, spark headlines, and trigger a fear of missing out among investors.
But seasoned investors will know that the key question isn’t how much is being paid but why.
So should investors buy now to capture the payout or take a step back and access the bigger picture?
ST Engineering’s Performance
For the first nine months of 2025 (9M2025), the group saw steady growth across its aerospace, defense, and urban solution business segments, with the group’s revenue jumping 9% year-on-year (YoY) to S$9.1 billion.
ST Engineering also closed 2025 with S$18.7 billion in new contracts.
This brought its order book to S$32.6 billion, a new high as of end of September 2025
Impairment losses were offset by the gains from the divestments of non-core businesses, LeeBoy, SPTel and CityCab.
Looking at its cash flow statement for the first half of the year (1H2025), net cash flow from operating activities came in at S$761 million.
However, compared to the same period last year, there was a 6% YoY drop due to working capital movements.
The group also held around S$354 million worth of cash and equivalent, providing the flexibility to return capital to investors while having sufficient funds to maintain operations and investment activities.
How Special Dividends Should be Interpreted
ST Engineering’s special dividends didn’t come out of nowhere.
This special dividend was largely funded by recent divestments.
In other words, the group sold assets, freed up cash, and passed a portion of that back to shareholders.
That is not a bad thing though.
In fact, it shows that ST Engineering will reward investors with its excess capital.
But, this special dividend payout is one-off in nature and not a sign that future dividends will be higher.
Since it is not like regular dividends that are paid out of recurring operating cash flows, investors should remain level-headed and treat this as a bonus.
ST Engineering’s Dividend Track Record
To be fair, ST Engineering is not some unreliable dividend payer that is suddenly throwing out cash.
The company has a solid record of paying regular dividends, backed by recurring earnings and stable cash flows.
Based on its dividend history, payouts have increased since 2022, reflecting management’s preference for sustainable growth rather than aggressive hikes.
The Case for Buying Now
ST Engineering continues to appeal as a defensive investment with diversified revenue streams.
With this diversification, it helps cushion the business against downturns in any single segment.
The group has also proven itself to be a reliable long-term dividend payer, with the special dividend providing an added boost to its near-term yield.
The Case for Caution
That said, like every other investment, ST Engineering is not risk-free.
Special dividends may already be partly priced into the share price, which limits the upside for investors who buy just for the payout.
The yield tends to normalise quickly once the stock goes to ex-dividend.
There are also business risks to consider, like execution risk or rising cost pressures.
Most importantly, investors should take note of the opportunity cost.
Locking in capital for a one-off dividend means potentially missing out on better long-term investment elsewhere.
What Investors Should Watch Before Buying
Before jumping right in, there are a couple of things to keep in mind.
Firstly, check the operating cash flow as that is what ultimately supports future payouts and monitor the growth of regular dividends.
It will also be helpful to keep an eye out for news or signals from the management to get a better idea of future plans.
Beyond dividends, valuation still matters.
While historical results do not guarantee future performance, comparing today’s valuation with historical data can still provide a better context of things.
Get Smart: Don’t Let Special Dividends Cloud the Bigger Picture
ST Engineering’s special dividend is nice to have but it should not be the reason why you buy the stock.
If you’re a long-term investor, you should look at whether the company has stable cash flow, sensible asset allocation, and earnings visibility.
Remember – special dividends come and go but fundamentals are what drives real returns.
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Disclaimer: Charlyn Tan does not own shares in any of the companies mentioned.
