Stock markets have been understandably jittery over the past few weeks.
The Covid-19 virus outbreak shows no signs of abating, with new cases continuing to pop up in countries such as Italy, South Korea and the USA.
Amidst the turmoil wrought by travel curbs and disrupted supply chains, share prices of companies from affected industries have been hit hard.
During such uncertain times, investors will naturally seek safe havens to park their money in order to weather the storm.
Here are my top three dividend-paying blue-chips that will allow you to sleep well at night and yet enjoy a steady stream of passive income.
SATS Ltd (SGX: S58)
SATS Ltd is a leading gateway services provider and food caterer for major airlines.
The group is present in 60 locations and 13 countries and also operates central kitchens that supply food to renowned restaurants such as Haidilao International Holding Ltd (HKSE: 6862).
SATS has been a regular payer of dividends, with a total of S$0.19 per share declared during its fiscal year 2019 earnings. The shares offer a dividend yield of around 4.6% at the last traded price of S$4.12.
However, investors should be aware that near-term headwinds caused by Covid-19 will definitely have an adverse impact on SATS’ business, as air cargo and passenger volumes plunge across the region.
SATS may resort to reducing dividends in order to conserve cash, but even if dividends were reduced down to S$0.16 (a 15% cut), the shares would still offer a 3.9% dividend yield.
Meanwhile, the group continues to execute its planned merger and acquisition strategy announced during its 2019 Investor Day. Just this week, SATS announced the purchase of aviation food innovator Monty’s Bakehouse for S$48.4 million.
Venture Corporation Limited (SGX: V03)
Venture Corporation is a leading provider of technology solutions, products and services.
The group is a large contract manufacturer for a diverse range of Fortune 500 companies in industries spanning life sciences, medical devices, financial technology and lifestyle consumer technology, to name a few.
Venture manages a portfolio of more than 5,000 products and solutions and continues to innovate in order to penetrate into new domains
The contract manufacturer reported a decent set of earnings for the fiscal year 2019, with revenue up 4.3% year-on-year and net profit after tax dipping slightly by 1.8% year-on-year.
Free cash flow, however, remained strong at S$194.6 million and the group has a free cash flow margin of around 5.4%.
A total dividend of S$0.70 was declared for the previous fiscal year, which translates to a dividend yield of around 4.1%.
There is a chance of supply chain disruptions from the closure of factories in China affecting the group’s operations, but this should be a temporary phenomenon. Venture should do well over the long-term with the growing importance of both artificial intelligence and the Internet of Things.
OCBC Bank Limited (SGX: O39)
OCBC is one of the Big Three banks in Singapore.
It is the second-largest financial services group in Southeast Asia by assets and offers a broad range of commercial banking and wealth management services.
The bank continued to perform well for the fiscal year 2019, with total income up 12% year-on-year and core net profit up 10% year-on-year.
OCBC raised its full-year dividend by 23% to S$0.53 for a payout ratio of 47%. At the last traded price of S$10.50, the shares offer a trailing dividend yield of 5.0%.
The Covid-19 outbreak will stunt loan growth in the near-term, as CEO Samuel Tsien recently remarked, while the net interest margin could come under pressure due to the US Federal Reserve cutting interest rates by 0.5%.
However, the bank is efficient in managing costs, with cost-to-income ratio declining from 43.4% in 2018 to 42.7% in 2019, and it should be able to weather this temporary stress without affecting its dividend payout.
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Disclaimer: Royston Yang owns shares in SATS Ltd.
