The aviation sector saw a sharp surge in demand during 2023 and 2024 as people took to the skies again after the pandemic receded.
Aviation-related stocks, however, delivered a mixed performance.
Singapore Airlines Limited (SGX: C6L), or SIA, saw its share price dip by 1.8% in 2024, while SATS Ltd’s (SGX: S58) share price soared 32.4% last year.
Meanwhile, SIA Engineering (SGX: S59), or SIAEC, saw its share price remain flat at S$2.38 through last year.
With travel demand moderating this year, coupled with uncertainty swirling around Trump’s tariff announcement, can these aviation stocks still deliver better earnings and increase their dividends?
A decent dividend track record
With all three companies having a 31 March fiscal year-end, let’s have a look at their dividend track records for the current and previous fiscal year.
SIA reported an interim dividend of S$0.10 for its first half of fiscal 2025 (1H FY2025), unchanged from a year ago.
However, Singapore’s flagship carrier did increase its final dividend for the previous FY2024 from S$0.28 to S$0.38.
This takes the total trailing 12-month (TTM) dividend to S$0.48, giving SIA’s shares a TTM dividend yield of 7.2%.
For SATS, the ground handler and food caterer paid out an interim dividend of S$0.015 for 1H FY2025 and a final dividend of S$0.015 for FY2024, taking its TTM dividend to S$0.03.
These dividends were a restoration of the blue-chip group’s payments after halting its dividend payments because of the pandemic.
Shares of SATS offer a low dividend yield of just 1.1%.
As for SIAEC, the maintenance, repair and overhaul (MRO) group kept its 1H FY2025 interim dividend constant at S$0.02.
For FY2024’s final dividend, it was raised from S$0.055 the previous fiscal year to S$0.06, taking the TTM dividend to S$0.08.
SIAEC’s shares offer a TTM dividend yield of 3.6%.
Earnings recap
In addition to each company’s dividend history, it’s also insightful to look at how each business performed for its latest quarter and the first nine months of fiscal 2025 (9M FY2025).
For SIA, the airline grew its revenue by 3.3% year on year to S$14.7 billion for 9M FY2025.
Operating profit, however, plunged by 34.1% year on year to S$1.4 billion because of higher fuel costs and other expenses.
Net profit was boosted by a one-off gain of S$1.1 billion from the disposal of Vistara; excluding this, net profit would have tumbled 40% year on year to S$1.3 billion.
SATS performed much better, with revenue rising 14% year on year to S$4.3 billion and operating profit more than doubling year on year to S$367.4 million.
SATS’ net profit leapt more than eightfold year on year to S$205.1 million for 9M FY2025.
SIAEC’s revenue for 9M FY2025 rose 11.8% year on year to S$901 million while its net profit did well, climbing 24.1% year on year to S$107 million.
With both SATS and SIAEC reporting better earnings, these two companies have a higher chance of paying out larger dividends when they report their FY2025 results by the end of May.
Cloudy skies with a chance of turbulence
Meanwhile, the aviation industry should still see decent passenger growth this year, with the International Air Transport Association (IATA) projecting an 8% year-on-year increase in passenger numbers for 2025.
However, the raft of tariffs imposed by Trump will act as a dampener for consumer spending as the costs of goods and services rise.
With air travel and holidays being a discretionary expense, more people are likely to curtail their spending and tighten their belts, preferring to focus on squirrelling money away to spend on daily necessities, instead.
Even business travel may be negatively impacted as companies defer their investments and capital spending in light of higher overall costs.
Depending on the outcome of trade talks, a bruising trade war could be averted, but there may still be some spillover effect of the reciprocal tariffs on both costs and sentiment.
Hence, the aviation industry will be flying into cloud skies with a high probability of encountering turbulence that may impact all players.
Get Smart: Dividends could decline in the next fiscal year.
With both SATS and SIAEC reporting healthy year-on-year increases in net profit, these two companies may increase their dividends for FY2025.
However, with the outlook being murky as we head into FY2026, these companies may stay cautious and either maintain or reduce their payouts to conserve cash.
Elsewhere, SIA is likely to hunker down as a mix of lower demand, stiffer competition, and higher fuel and other costs eat into its bottom line.
Of the three, SIA is the most likely candidate to lower its dividends for FY2025 as its operating and net profit suffered a year-on-year decline.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
