There are a few useful indicators to look for when it comes to identifying good dividend stocks.
For example, many investors will pay attention to a company’s free cash flow, dividend payout ratio, dividend yield and net profit.
But one more important aspect may be neglected by investors.
This factor is the dividend growth rate, or how fast a company increases its dividends over time.
Companies with fast-growing dividends can increase your passive income stream without requiring you to invest more capital.
In the long run, you should also enjoy capital gains as the share price rises in tandem with the higher dividends.
If such businesses sound like your cup of tea, read on for five companies that raised dividends in 2021.
Keppel Corporation Limited (SGX: BN4)
Keppel Corporation is a blue-chip conglomerate with businesses in energy and environment, urban development, connectivity, and asset management.
The conglomerate has endured tumultuous times.
After incurring a net loss of S$505.9 million in 2020, the company embarked on an extensive strategic review and restructuring.
The move seemed to help as Keppel managed to reverse the losses and book a net profit of S$300 million for its fiscal 2021 first half.
Thanks to the strong performance, Keppel announced an interim dividend of S$0.12 this year, quadrupling the S$0.03 paid in 2020.
The latest distribution also marked the highest interim dividend Keppel has paid since 2015.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, owns and manages a portfolio of nine suburban malls in Singapore.
Retail REITs such as FCT took a beating during the pandemic.
Restrictions on mall capacity, dining out and other social activities severely limited footfall at shopping malls, and rental reliefs had to be doled out to struggling tenants.
Thankfully for FCT, suburban malls have recovered quickly.
While shopper traffic at FCT’s malls remained depressed, tenant sales are back at pre-COVID levels.
The REIT’s net property income for its fiscal year ended 30 September 2021 surged 122.4% to S$246.6 million due to its enlarged portfolio after the ARF acquisition.
In line with the stronger performance, FCT paid out S$0.12085 in distributions per unit for the year, 33.7% higher than S$0.09042 paid out the year before.
OCBC Ltd (SGX: O39)
OCBC is one of the “big three” local banks.
It is also Southeast Asia’s second largest financial services group by assets and operates 470 branches and offices in 19 countries and regions.
Back in July 2020, the Monetary Authority of Singapore imposed a dividend cap on the local banks, at 60% of dividends paid in fiscal year 2019.
The pre-emptive move was to ensure the banks conserve liquidity in a time of economic uncertainty.
Complying with the restriction, OCBC’s dividends in 2020 totalled S$0.318, exactly 60% of the $0.53 paid in 2019.
This year, MAS finally lifted the cap.
Powered by strong earnings, OCBC has restored its interim dividend to S$0.25, 57.2% higher than the year before and in line with its 2019 interim dividend.
Micro-Mechanics (Holdings) Ltd (SGX: 5DD)
Micro-Mechanics, or MMH, designs and manufactures high-precision tools and parts used by the semiconductor industry.
Semiconductors, or chips, are an essential component of many electrical appliances.
Businesses around the world have been forced to digitalize amidst the pandemic, leading to heightened demand for electronic devices around the world.
MMH is a beneficiary of this structural tailwind.
In its latest quarterly report for the quarter ended 30 September 2021, the company reported that revenue grew 12.7% year on year, while net profit improved by 6.9% as compared to the year before.
For the company’s fiscal 2021, it paid total dividends of S$0.14, 16.7% higher than the S$0.12 paid in FY20.
Wilmar International Limited (SGX: F34)
Wilmar is an integrated agribusiness chain that covers the entire value chain of the agricultural commodity business, including cultivating, milling, processing, branding and distribution.
Similar to MMH, Wilmar has performed well during the pandemic.
For the nine months ended 30 September 2021, the group posted strong year on year revenue growth of 29.7%, while core net profit also improved by 15.1% year on year.
The good performance was attributed to good manufacturing margins, increase in overall volume for food products and higher demand for tropical oil products.
Shareholders were rewarded for the company’s good performance.
During the year, Wilmar declared an interim dividend of S$0.05, the highest amount in the company’s history.
Get Smart: Knowing the why
All the companies listed above raised dividends this year but were able to do so because of different reasons.
Keppel and FCT experienced a strong recovery in 2021, OCBC benefitted from an easing of regulations, while MMH and Wilmar were lifted by tailwinds arising from the pandemic.
Investors should not flock to buy a stock simply because it has raised dividends.
Understanding why the company did so, and figuring out whether the increase is sustainable, are far more important in determining if the company deserves a place in your investment portfolio.
In our latest Special FREE Report, we cover the best performing stocks, blue chips, and REITs in the Singapore market in 2021. Look forward to 2022 as we cover the industries and sectors that are poised to do well in the year ahead. Click HERE to download for free now.
Disclosure: Herman Ng does not own shares in any of the companies mentioned.