3 Companies with 40% Dividend CAGR & Sustainable Payout Ratio

For dividend investors, the 2 important metrics to look at for the various dividend counters will be growth in total dividend per share and the sustainability in dividend payout ratio (< 1 time).

The growing total dividend per share across a period of time ensures that investors will be able to achieve a growing return on their investment. On top of that, the sustainability in dividend payout ratio will guarantee that the dividend paid out by the respective company will continue for the foreseeable future.

With that in mind, we will be looking at 3 companies which pay growing dividends and have a sustainable payout ratio, which are:

• Civmec Limited (SGX: P9D)
• China Everbright Water Limited (SGX: U9E)
• The Hour Glass Limited (SGX: AGS)

1) Civmec Limited (SGX: P9D)

Civmec Limited (“Civmec”) is an integrated, multi-disciplinary construction and engineering services provider to the Oil & Gas, Metals & Minerals, Infrastructure and Marine & Defence sectors. Headquartered in Henderson, Western Australia, Civmec has regional offices in Newcastle (New South Wales, Australia), Gladstone (Queensland, Australia), and Broome (Western Australia). The company is listed on the SGX (Singapore) and the ASX (Australia).

Its core capabilities include heavy engineering, shipbuilding, modularisation, SMP (structural, mechanical, piping), EIC (electrical, instrumentation and control), precast concrete, site civil works, industrial insulation, maintenance, surface treatment, refractory and access solutions.

For FY2019, Civmec’s total dividend per share stood at just 0.7 Singapore cents per share and has since grown to 2.02 Singapore cents per share in FY2021.

With the growth in earnings outpacing the growth in total dividend per share, this resulted in the significant decline in Civmec's dividend payout ratio from 60.8% in FY2019 to just 28.5% and 28.9% in FY2020 and FY2021 respectively.

With dividend payout ratio less than 30%, this shows that the company is setting aside more resources on hand for the business operations, while continuing to reward shareholders with a portion of the earnings in dividends.

2) China Everbright Water Limited (SGX: U9E)

China Everbright Water Limited (“China Everbright”) is an environmental protection company focusing on water environment management. The Company has developed a full-fledged business coverage, which includes raw water protection, water supply, municipal waste water treatment, industrial waste water treatment, reusable water, river-basin ecological restoration, and sludge treatment and disposal.

For FY2018, China Everbright’s total dividend per share stood at 0.99 Singapore cents and has since grown to 1.71 Singapore cents in FY2020.

Meanwhile, with the growth in total dividend per share outpacing the growth in its earning, China Everbright’s dividend payout ratio grew from 22.2% in FY2018 to 28% in FY2020. This shows that the management is willing to distribute a higher portion of its earnings to shareholders as dividends.

3) The Hour Glass Limited (SGX: AGS)

The Hour Glass Limited (“The Hour Glass”) is one of Asia’s luxury watch retail groups and has an established presence with over 40 boutiques in 12 key cities in the Asia Pacific region. The Hour Glass is the official retailer for a collection of luxury watches from more than 50 of the world’s finest watch brands such as Audemars Piguet, Cartier, Hublot, IWC, Patek Philippe, Rolex, Sinn, TAG Heuer.

For FY2019, The Hour Glass’ total dividend per share stood at 3.0 Singapore cents and has since grown to 6.0 Singapore cents in FY2021.

Despite the gradual increase in its earnings across the years, its total dividend per share in FY2021 shot up by more than 200% year-on-year and this resulted in its dividend payout ratio to surge to 51.2%. This indicates that The Hour Glass’ management is willing to share a higher portion of its earnings as dividends.

Conclusion

To conclude, having consistent growth in total dividend per share and a sustainable dividend payout ratio are the 2 most important factors in determining whether the respective companies will be a good dividend counter.

Apart from these metrics, investors should also look at its individual business model and historical financial performance to determine the sustainability in its earnings in the medium term.

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