4 Positive Free Cash Flow Companies with Dividend Yield above 5%

Income investors are attracted to stable stocks dishing out high dividend yields as it is a viable way to supplement their cashflows. On top of that, the ongoing geopolitical conflict also pushed more investors to seek shelter in these dividend paying companies.

However, for dividends to be sustainable, one important aspect investors need to consider is the presence of positive free cash flow. Companies need to achieve consistent free cash flow, so that investors can be assured that the company can pay out dividends at ease, without the need for extra financing.

With that in mind, we will be looking at 4 cashflow positive companies paying more than 5% dividend yield:

• Ban Leong Technologies Limited (SGX: B26)
• CSE Global Limited (SGX: 544)
• HC Surgical Specialists Limited (SGX: 1B1)
• Q&M Dental Group Limited (SGX: QC7)

1) Ban Leong Technologies Limited (SGX: B26)

Ban Leong Technologies (“Ban Leong”) Limited has been listed on SGX since 23rd June 2005. The Company's principal activities include wholesale and distribution of computer peripherals, accessories and other multimedia products. The Company's segments include Multimedia, Data storage and IT accessories.

Dividend

Source: ShareInvestor WebPro

According to the dividend trends chart above, the dividend per share (green bar) has been on a fluctuating trend for the past few financial years.

For FY2020, the total dividend per share came in at just 1.25 Singapore cents, as compared to 1.5 Singapore cents a year earlier, on back of lower earnings. With the sharp recovery in earnings, Ban Leong paid out a total dividend per share of 2.5 Singapore cents in FY2021.

Based on its current share price of S$0.38, its indicative yield came in at 6.58%.

Free Cash Flow

Source: ShareInvestor WebPro

Despite the fluctuating amount in its total dividend per share, Ban Leong’s free cash flow has been in an upward trajectory since FY2019. In particular, its free cash flow in FY2021 grew by nearly 140% year-on-year to S$8.24 million. This can be attributed to the strong cash flow from its operating activities.

2) CSE Global Limited (SGX: 544)

Listed on Singapore Exchange since 1999, CSE Global Limited (“CSE Global”) is a global technologies company with an international presence spanning the Americas, Asia Pacific, Europe, Middle East and Africa. The Group now has more than 1,400 employees worldwide and operates a network of 42 offices across the globe, generating more than 90 percent of its revenues outside its home market.

Dividend

Source: ShareInvestor WebPro

For the past few financial years, CSE Global has continued to pay out a same level of total dividend per share of 2.75 Singapore cents. Even with the substantial drop in its earnings in the latest financial year, the company continued to practice paying out the same level of dividends.

However, this has also resulted in its dividend payout ratio to shot up to 93% in FY2021, as compared to the low level of between 50% and 70% for the past few financial years.

Based on its current share price of S$0.47, its indicative yield came in at 5.85%.

Free Cash Flow

Source: ShareInvestor WebPro

For the past few financial years, CSE Global’s free cash flow faced with huge fluctuations of between S$40.93 million and just S$1.37 million. This phenomenon was attributed to the volatile figure from its net cash flow from operating activities, despite the lower capital expenditure across the years.

3) HC Surgical Specialists Limited (SGX: 1B1)

HC Surgical Specialists Limited (“HC Surgical”) was listed on SGX since 3rd November 2016. HCSS and its subsidiaries is a medical services group primarily engaged in the provision of endoscopic procedures, including gastroscopies and colonoscopies and general surgery services with a focus on colorectal procedures across a network of 18 clinics located throughout Singapore.

Dividend

Source: ShareInvestor WebPro

After the minor dip in its total dividend per share in FY2020 due to the lower earnings, HC Surgical’s total dividend per share grew by 100% in FY2021 to 4.0 Singapore cents. This was mainly due to the recovery in its earnings in the same period.

Meanwhile, despite the surge in dividends, HC Surgical’s dividend payout ratio has dipped to just 75% in FY2021, as compared to 85% a year earlier.

Based on its current share price of S$0.485, its indicative yield came in at 8.25%.

Free Cash Flow

Source: ShareInvestor WebPro

For FY2020, HC Surgical saw a 15% year-on-year dip in its free cash flow, due to the higher capital expenditure and lower cash flow from its operating activities.

This figure managed to rebound strongly in FY2021, with a 82% year-on-year increase to S$10.54 million. This can be seen from the lower capital expenditure and a substantial jump in its net cash flow from operating activities.

4) Q&M Dental Group Limited (SGX: QC7)

Q&M Dental Group Limited (“Q&M Dental”) is a leading private dental healthcare group in Asia. The Group owns the largest network of private dental outlets in Singapore, operating 85 dental outlets across the country. The Group also operates 5 medical clinics and a dental supplies and equipment distribution company.

Dividend

Source: ShareInvestor WebPro

For the past few financial years, Q&M Dental’s total dividend per share has been on a rising trend. This upward trajectory was mainly assisted by the higher earnings across the years. For FY2018, its total dividend per share stood at just 0.82 Singapore cents and has since grown to 4.0 Singapore cents in FY2021.

Based on its current share price of S$0.51, its indicative yield came in at 7.84%.

Free Cash Flow

Source: ShareInvestor WebPro

Based on the table above, we can generally see that Q&M Dental’s free cash flow has been on a rising trend, apart from FY2020, where there is a 12% year-on-year decline in free cash flow. The decline was caused by the lower net cash flow from its operating activities

In FY2021, its free cash flow jumped by more than 130% year-on-year, on back of the higher net cash flow from its operating activities, while partially offset by the higher capital expenditure in the period.

Conclusion

To conclude, income investors can look at these four companies mentioned above due to their attractive dividend yields.

That said, simply looking at dividend yield alone is not enough and prospective investors should also do their due diligence on the cashflow generative ability, borrowing levels and more.

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