It’s earnings season again. Many of us look at companies we own for updates, and sometimes make the mistake of condemning a company after just one quarter of negative growth.
Most need to remember that we are looking out for consistency as long term investors.
Supermarket giant, Sheng Siong Group (SGX: OV8), or Sheng Siong in short, reported its 1H2022 earnings last week.
While revenue growth was impacted as more consumers dined out as Singapore eases up further, there are a few points to note for investors.
One aspect to look at, in particular, was whether Sheng Siong will raise its dividends.
Let’s find out more below.
1. An increase in 1H2022 earnings
In 1H2022, Sheng Siong reported a year on year increase of 2.1% in net profit to S$67.5 million, although revenue dipped slightly by 0.7% year on year in the same period to S$676.7 million.
Reasons for these numbers include revenge travel, the further easing of COVID-19 measures, and more people choosing to dine out.
As a result, the pandemic-related demand is tapering out.
While not entirely unexpected, Sheng Siong has mentioned that this is happening in past earnings releases. That said, this shift has not stopped Sheng Siong’s plans to grow.
In 1H2022, Sheng Siong opened two new stores, bringing the total store count in Singapore to 66, compared to that of 64 as of end-2021.
Sheng Siong also opened two more stores in China sinc 1H2021, bringing the total store count in China to four, compared to two in the first half of last year.
|No of Stores||1H2022||1H2021|
Source: Sheng Siong 1H2022 Earnings Release, Review of Performance of The Group
2. Gross profit margin is higher
Sheng Siong’s ability to consistently maintain its gross profit margin has been one of the key attributes that caught my attention .
For 1H2022, Sheng Siong’s margin rose to 29.4% from 28.2% in 1H2021. Sheng Siong attributed this to the changes in sales mix.
Sheng Siong has always been tweaking its sales mix to pinpoint what will do well, thus enabling the group to have a tight grip on its profit margins.
Looking back at gross profit margins from 2017 to date, the 29.4% gross profit margin is the highest gross profit margin Sheng Siong has achieved in the last five years.
Source: Sheng Siong Investor Relations, 1H2022 Earnings Release, Gross Profit Margin
3. Sheng Siong declared a higher interim dividend
In 1H2022, Sheng Siong declared an interim dividend of S$0.0315. This is up from the previous interim dividend of S$0.031 in 1H2021.
Tracking Sheng Siong’s dividend history as tabled below, apart from the pandemic- related growth spurt seen in 2020, where an interim dividend of 3.5 cent was paid, the interim dividend of 3.15 cents, is on the higher end of the spectrum.
The table below tracks Sheng Siong’s dividend payment history since FY2017.
FY2020 saw dividends increase due to a spike in pandemic-related demand which has since subsided.
Compared with the interim dividend of S$0.035 paid back then, the 1H2022 dividend of S$0.0315 is the second-highest interim dividend paid out by the retailer in the last five years.
Source: Sheng Siong Investor Relations, 1H2022 Earnings Release, Dividend Per Share
Bearing in mind that growth has tapered off as warned by Sheng Siong, this increased dividend is still testament that the supermarket giant is committed to deliver healthy returns to shareholders.
Remember, well-managed companies pay out regular dividends, and Sheng Siong’s business is one that will continue to perform through good times and bad.
At a unit price of S$1.60, the trailing 12-month dividend of S$0.0615 translates to a trailing dividend yield of 3.8%.
Looking for investment opportunities in 2022 and beyond? In our latest special FREE report “Top 9 Dividend Stocks for 2022”, we’re revealing 3 groups of stocks that are set to deliver mouth-watering dividends in the coming year.
Our safe-harbour stocks are a set of blue-chip companies that have been able to hold their own and deliver steady dividends. Growth accelerators stocks are enterprising businesses poised to continue their growth. And finally, the pandemic surprises are the unexpected winners of the pandemic.
Want to know more? Click HERE to download for free now!
Disclaimer: Kent Lee owns shares of Sheng Siong.