Double-digit dividend yields are way too tempting for income-focused investors to ignore.
After all, a S$100,000 investment into a stock that yields 10% generates S$10,000 in passive income a year; a figure hard to beat by merely investing in most blue-chip stocks or real estate investment trusts (REITs).
However, there’s no free lunch in this world; experienced investors know that such high yields are typically not sustainable.
In this article, we look at two high-yielding names and their underlying fundamentals to gauge if they’re worth a place on your watchlist.
Why High Dividend Yields Can Be Misleading
Usually, high yields should be met with caution.
A stock can offer a yield of more than 10% as a result of share price depreciation because of earnings contraction.
In this case, where earnings are under pressure, the high yield could be temporary as management looks to conserve cash by cutting the dividend.
This drastically reduces the appeal of a high yield.
When you see high yields available, it should serve as a starting point for your research, instead of a call to blindly buy the stock for the yield.
In particular, focus on the following: is the dividend payout ratio reasonable and well covered by free cash flow generation?
Is the balance sheet healthy, and what’s management’s outlook on future earnings?
Finally, also consider the company’s dividend track record.
The key takeaway is that a high yield is only good if the dividends are sustainable.
SBS Transit Limited (SGX: S61) – The High-Yield Income Play
On paper, SBS Transit, whose buses and trains you likely ride on your daily commute, sports an eye-watering yield.
But before you get excited, here’s the catch: most of the company’s trailing dividend was a one-off.
For 2025, the bus and train services operator declared a total dividend of S$0.496 per share, with S$0.1761 per share being the core dividend and the remaining S$0.3199 per share being a special dividend.
These dividends translate to a trailing yield of approximately 13.7%, given that shares are trading at S$3.63 apiece (as of closing on 21 July 2026).
That said, SBS Transit’s dividend represents an earnings payout ratio of 253%.
Surprisingly, 2025’s free cash flow of S$104 million covers this dividend outlay of S$100.1 million, albeit barely.
In SBS Transit’s latest quarterly report (for 1Q2026), it reported S$15.6 million in profit after tax.
Its balance sheet remains healthy with zero debt and S$476.4 million in cash.
Asia Pay Television Trust (SGX: S7OU) – The Contrarian Opportunity
Asia Pay Television Trust, or APTT, is the epitome of a battleground between bears and bulls.
Bulls argue that the subscriber base has been growing, up 0.5% to 1.391 million as of the first quarter of 2026.
Annual distributions have consistently been paid since 2013, with 2025’s total payout of S$0.0105 per unit (S$19 million in total) comfortably covered by its free cash flow of S$85.8 million.
This translates to a trailing distribution yield of approximately 12.4%.
Bears argue that the business is in a structural decline, with revenue declining from S$334.8 million in 2017 to S$243.2 million in 12 months ending 31 March 2026.
In the same period, net profit collapsed 54% to S$16.7 million.
The balance sheet is also highly levered, with the company sporting a net debt to EBITDA (earnings before interest, taxes, depreciation, and amortisation) ratio of 7.6 as of 31 March 2026, with S$1.06 billion in outstanding debt.
To work down APTT’s debt load and interest payments, management is guiding for a reduction in the trust’s distribution to S$0.008 per unit for 2026.
Looking ahead, management expects the subscriber base to continue growing, although pricing and EBITDA will remain under pressure.
Red Flags Investors Should Watch
Watch for unsustainably high payout ratios: if a company’s dividend consistently exceeds earnings or free cash flow, the money is coming from somewhere else (reserves, borrowings, asset sales etc.), and that can’t run forever.
Weak balance sheets with heavy leverage and looming refinancing further reduce the dividend’s buffer.
Finally, a sunset industry, characterised by falling revenue and shrinking margins, will also eventually drag a company’s dividend down.
A high yield can’t paper over any of these for long.
Should Investors Chase Double-Digit Yields?
There are reasons to consider double-digit yields: The income is attractive, and if the market’s fears do not materialise, you can pocket a fat payout and possibly enjoy some capital upside as sentiment recovers.
Contrarian bets, when they’re right, pay handsomely.
But go in clear-eyed.
The higher the yield, the higher the odds it gets cut.
High-yielding stocks could be classic value traps where you lose more on the share price than you ever collect in dividends.
A dividend yield should never be read in isolation; it has to be balanced against business fundamentals.
Get Smart: The Best Dividend Stocks Don’t Just Pay More — They Last Longer
Never invest in a business just because it sports a tempting double-digit yield.
Instead, focus on unearthing quality businesses with strong cash generation, healthy balance sheets, and sustainable dividend payout.
Long-term income investors should prioritise companies with strong cash flow, healthy balance sheets, and sustainable payout policies that can ride through a rough patch.
SBS Transit and APTT each have a genuine case for investment.
However, the lesson they share is the one that counts: the best dividend isn’t the highest.
It’s the one that lands in your account, year after year.
One of these six companies is the only one legally allowed to operate in Singapore. It has increased its dividend for 16 consecutive years. Discover which one it is in our free report here.
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.
