The SPDR STI ETF (SGX: ES3), which tracks the performance of the Straits Times Index (SGX: ^STI), currently offers a dividend yield of just under 3.5%.
For many income-seeking investors in Singapore, this represents the psychological benchmark to beat.
If a stock isn’t yielding more than the market average, you have to ask yourself why you are taking the individual stock risk.
Three SGX-listed small caps – Delfi Limited (SGX: P34), Civmec Limited (SGX: P9D), and Tai Sin Electric (SGX: 500) – all sport trailing yields above that threshold, ranging from roughly 3.7% to 4.5%.
However, a dividend is only as good as the cash flow funding it.
We look under the hood to see which of these payouts stand on firm ground and which might be skating on thin ice.
Delfi: The Quiet Fortress
Delfi saw headline numbers for the 2025 fiscal year (FY2025) that looked rather unremarkable at first glance.
Revenue dipped 0.5% year on year (YoY) to US$500.1 million, while net profit slipped 2.1% to US$33.2 million.
These are not the kind of results that usually grab the headlines or excite growth investors.
But the picture changes entirely when you shift your gaze to the cash flow statement.
Free cash flow soared to US$69.9 million, up significantly from US$24.7 million a year ago.
This was driven by tighter working capital management and lower capital expenditure.
The chocolate confectioner also sits on a very comfortable net cash position of US$53.5 million, with US$68 million in the bank against just US$14.5 million in debt.
Interestingly, management decided to trim the total dividends to S$0.0343 per share from S$0.0429 in the previous year, even as cash flow surged.
At a share price of S$0.925, that works out to a trailing yield of approximately 3.7%.
This is a classic example of dividend discipline.
The payout is well-covered by free cash flow, the balance sheet is pristine, and management is choosing to reinvest in its core brands and distribution capabilities rather than stretching the payout ratio.
For long-term income investors, Delfi’s slightly lower dividend may paradoxically be the safest and most sustainable of the three.
Civmec: The Pipeline Play
Civmec, the construction and engineering services provider headquartered in Australia, posted a weaker first half for its fiscal year ending June 2026 (1HFY2026).
Revenue fell 24.3% YoY to A$380.4 million, while net profit declined 19% to A$21.4 million.
Free cash flow remained in negative territory at A$11.3 million, though this was an improvement from the prior year’s outflow.
The silver lining here is that the balance sheet remains healthy with a net cash position of A$27.6 million.
Furthermore, gross profit margins actually improved to 11.8%, suggesting the company is maintaining its pricing power despite the lower volume of work.
The interim dividend was maintained at A$0.025 per share.
At a share price of S$1.39, the shares offer a trailing yield of approximately 4.1%.
What keeps the dividend thesis alive for Civmec is its growing order book.
This stood at A$1.35 billion as of late 2025, up from A$1.25 billion just three months earlier.
The company is also engaged in several early-stage contractor involvement processes for medium to large-scale projects.
If this pipeline converts to realized revenue in the coming quarters, the current dividend should remain sustainable.
However, if these projects stall, the negative free cash flow trend will become much harder for investors to ignore.
Tai Sin Electric: The Yield Trap Risk
At first glance, Tai Sin Electric appears to tick every box for a yield-hungry investor.
Revenue surged 20% YoY to S$282.2 million in the first half of fiscal year 2026 (1HFY2026).
The group offers a trailing yield of approximately 4.5%, which is the highest of the three stocks mentioned here.
However, once you dig into the earnings quality, the story becomes a bit more uncomfortable.
Net profit plunged 53.1% YoY to S$7.4 million.
This was largely dragged down by an S$11.8 million provision for onerous contracts in its Cable and Wire segment, triggered by rising copper prices.
Free cash flow also turned negative at S$0.4 million, compared to a positive S$4.1 million in the prior year.
Unlike Delfi or Civmec, Tai Sin carries significant net debt, with S$42.3 million in cash against S$105.7 million in borrowings.
Despite these headwinds, the interim dividend was held steady at S$0.0075 per share.
The long-term growth drivers for the group remain intact, including data centre demand, the energy transition, and public sector construction.
But when profits halve and free cash flow disappears, maintaining the same dividend becomes a question of management’s willingness versus their actual ability.
Investors should watch the second half of the year closely for signs of margin recovery and a return to positive cash generation.
Get Smart: Don’t Let a High Yield Do Your Thinking
A juicy dividend yield can be a wonderful reward for patient investors, but it can also be a flashing warning sign of trouble ahead.
The difference often comes down to three vital words: free cash flow.
Delfi’s surging cash flow and fortress balance sheet make its 3.7% yield one of the most dependable payouts on the SGX today, even after a recent dividend trim.
Civmec’s yield is more modest but is backed by a growing order book that could reignite earnings soon.
Tai Sin’s headline yield is certainly the most eye-catching, but with negative free cash flow and a leveraged balance sheet, it demands the most scrutiny from investors.
The lesson for all of us is simple.
Before chasing a high yield, always take a moment to ask what is actually funding it.
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Disclosure: Calvina L. does not own any of the stocks mentioned. Chin Hui Leong contributed to the article and owns shares of Delfi.
