3 Companies with Steady and/or Growing Dividends Across the Years

The term, Dividends, represents a portion of the corporate earnings that companies pass on to their shareholders. When companies are paying out dividends, it is sending out a positive message about their prospects and performance to the investor’s community.

On top of that, the company’s willingness and ability to pay steady and/or growing dividends over a period provides a solid demonstration of their financial strength.

With that, we will be looking at 3 Companies which have been increasing and/or kept their dividends steady across the years, which includes:

• Food Empire Holdings Limited (SGX: F03)

• Sheng Siong Group Limited (SGX: OV8)

• Frencken Group Limited (SGX: E28)

1) Food Empire Holdings Limited (SGX: F03)

Food Empire Holdings Limited (“Food Empire”) is a global branding and manufacturing company in the food and beverage sector. Its products include instant beverage products, frozen convenience food and snack food.

Food Empire’s products are exported to over 50 countries, in markets such as Russia, Vietnam, Ukraine, Kazakhstan, Central Asia, the Middle East, China, Mongolia and North America. The Group has 23 offices worldwide and operates 7 manufacturing facilities in Malaysia, India, Vietnam, Russia and Ukraine.

For the past 3 financial years, Food Empire’s total dividend per share has been on an uptrend. In FY2018, its total dividend per share came in at 0.68 Singapore cents and has grown to 2.2 Singapore cents in FY2020. This represents a growth rate of 223.53% across the period.

The higher dividend was mainly attributed to an improvement in its earnings and the higher dividend payout ratio, from 14.7% in FY2018 to 33.2% in FY2020.

Despite the higher dividend payouts in the past years, the ratio still sits below the 50% mark, indicating that the management is able to juggle both the company’s growth plans and pay out decent dividends at the same time.

2) Sheng Siong Group Limited (SGX: OV8)

Sheng Siong Group Limited (“Sheng Siong”) is one of the largest supermarket chains in Singapore. Currently, the group has 63 outlets across the island and are primarily located in retail locations in the heartlands of Singapore.

For the past 3 financial years, Sheng Siong’s total dividend per share has been on a rise due to better earnings. In FY2018, its total dividend per share was at 3.4 Singapore cents and has increased to 6.5 Singapore cents in FY2020. This represents a growth of 91.17% across the period.

Being a COVID-19 beneficiary, Sheng Siong’s earnings has seen a significant jump in FY2020 as more people stock up groceries during the pandemic period. Therefore, this resulted in a huge jump in its dividend for the period.

Despite the higher dividend, its dividend payout ratio has declined slightly to 70.5%, as compared to 72.2% achieved in FY2018. This shows that the company might want to keep some of its earnings for any form of business expansion.

3) Frencken Group Limited (SGX: E28)

Frencken Group Limited (“Frencken”) is a capital equipment, automotive and consumer product solution provider. It offers integrated outsourcing solutions to a diversified customer base comprising global companies. The Company operates through two segments: Mechatronics and Integrated Manufacturing Services (“IMS”).

• The Mechatronics segment is engaged in the design and manufacture of complex electro-mechanical assemblies and automation systems for original equipment manufacturers.

• The IMS segment is engaged in providing integrated solution to manufacture plastic components (including design and fabrication of mold) and printed circuit board assemblies (“PCBAs”) for assembly into modules and finished products.

In FY2018, Frencken’s total dividend per share came in at 2.14 Singapore cents and has grown to 3.0 Singapore cents in FY2019. This represents a 40.18% increase in the dividend payout. The rise in dividend was mainly due to higher earnings achieved in FY2019.

With FY2020’s earnings remain also unchanged for FY2020, therefore the company’s total dividend per share kept stable at 3.0 Singapore cents.

With the company’s dividend payout ratio keeping at 30% across the years, this shows that Frencken is more inclined to retaining majority of its earnings for the expansion of its business operations.

Conclusion

To summarize, companies that could pay both stable and increasing dividends overtime will be favoured by many income investors. It would be an icing on the cake if the dividend payout ratio is below the 50% mark, which means that the company is still retain earnings for future growth.

Putting these metrics aside, investors should also look at the business model of the respective company and other form of financial metrics when performing due diligence on each company.

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