All eyes are on the crop of blue-chip stocks as they ready themselves for the earnings season.
Investors will be curious to know how these billion-dollar companies are coping with the twin worries of high inflation and surging interest rates.
As you scrutinise their financial numbers, you should keep a close watch on the net profits and free cash flow that each business generates.
Many blue chips have a practice of raising their dividends to reward shareholders if they report a higher year on year net profit.
For income-driven investors, such an announcement will be music to their ears.
Let’s review five of these blue-chip names to determine if they have what it takes to increase their dividends.
DBS Group (SGX: D05)
DBS needs no introduction, being Singapore’s largest bank by market capitalisation.
The lender has reported a stellar set of earnings for 2022 as higher interest rates helped to boost its net interest income.
As a result, the group saw its net profit hit a record of S$8.2 billion last year.
In tandem with the strong performance, DBS not only declared a special dividend of S$0.50 but also raised its quarterly dividend from S$0.36 to S$0.42.
The robust performance looks set to continue with the bank projecting that the net interest margin could hit a peak of 2.25% (2022: 1.75%) as interest rate cuts are not expected this year.
DBS also expects loan and fee income growth along with the reopening of China’s economy.
The bank, however, has a habit of increasing its quarterly dividend in the final quarter of the year; hence, investors may have to wait for the fourth quarter 2023 results for the next increase should net profit continue to rise.
Genting Singapore (SGX: G13)
Genting Singapore is the owner and operator of the integrated resort (IR) at Resorts World Sentosa (RWS).
The IR boasts six hotels with around 1,600 rooms, a casino, a Universal Studios theme park, and one of Southeast Asia’s largest aquariums.
The group reported a sparkling set of earnings for 2022 and doubled its final dividend from S$0.01 to S$0.02.
Genting Singapore’s business should improve with China’s border reopening and the resumption of air travel as countries shake off the effects of the pandemic.
In addition, Festive Hotel will re-launch in May this year after renovations and add 389 rooms to the IR’s hotel inventory.
The new Singapore Oceanarium is also being constructed and these initiatives are part of RWS 2.0 expansion projects which are set to increase the appeal of the IR.
There’s a good chance that Genting Singapore may increase its interim dividend above the S$0.01 it declared last year should net profit continue climbing.
Singapore Technologies Engineering (SGX: S63)
Singapore Technologies Engineering, or STE, is a technology and engineering group that serves the aerospace, smart city, and defence sectors.
The blue-chip engineering giant reported a commendable set of earnings, with revenue rising 17.4% year on year for 2022 and net profit (adjusted for one-offs and exceptional items) jumping 39% year on year to S$549 million.
STE paid out a total dividend of S$0.16 for 2022, a slight increase from the S$0.15 that it had been paying out for the preceding five years.
The group maintained a robust order book of S$23 billion as of 31 December 2022 of which S$7.2 billion is expected to be recognised this year.
Should net profit continue climbing, STE may increase its quarterly dividend from the current S$0.04.
Frasers Logistics & Commercial Trust (SGX: BUOU)
Frasers Logistics & Commercial Trust, or FLCT, is a REIT with a portfolio of 105 properties valued at S$6.7 billion as of 31 December 2022.
FLCT’s gearing remains low at just 27.9% with an average cost of debt of just 1.7%.
With its debt headroom of S$3.1 billion, the REIT is open to tapping on its debt facilities for a yield-accretive acquisition.
Meanwhile, signs are also pointing to a potentially higher distribution when the REIT reports its fiscal 2023’s first-half results ending 31 March 2023.
The REIT reported a positive rental reversion of 11% and also has several ongoing development projects in the UK, one of which was completed in February this year.
Singtel (SGX: Z74)
Singtel is Singapore’s largest telecommunication company and offers a wide range of services such as mobile, pay TV, and broadband.
The group posted an encouraging set of earnings for its fiscal 2022 (FY2022) ending 31 March 2022 where underlying net profit grew 11% year on year.
Back then, the total dividend came in at S$0.093, up 24% year on year.
However, Singtel reported a mixed performance for its latest business update as underlying operating revenue rose while underlying operating profit declined.
The good news is that Singtel did declare a special dividend of S$0.05 to be paid in two equal tranches when it released its first half of 2023 results.
Investors can, therefore, look forward to this special dividend to help bump up the overall dividend for FY2023.
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Disclosure: Royston Yang owns shares of DBS Group and Frasers Logistics & Commercial Trust.