5 Companies with Dividend Payout Ratio above 50% for the past 3 years

The financial metric, Dividend Payout Ratio, measures the proportion of earnings being distributed to shareholders. Some companies will choose to pay out all their earnings to shareholders, while some other companies will pay out only a small portion of their earnings as dividends.

Stable companies who generate more cash flow than what is required to be reinvested for the current operations are more inclined to adopt a dividend payout ratio of at least 50% or more. This sort of balances out the need for companies to preserve resources for business expansion, while continuing to reward shareholders.

In this article, we will be looking at 5 companies with Dividend Payout Ratio 50% for the past 3 years:

• Avi-Tech Electronics Limited (SGX: BKY)
• Delfi Limited (SGX: P34)
• Hong Leong Finance Limited (SGX: S41)
• Maxi-Cash Financial Services Corporation Limited (SGX: 5UF)
• Tai Sin Electric Limited (SGX: 500)

1) Avi-Tech Electronics Limited (SGX: BKY)

Avi-Tech Electronics Limited (“Avi-Tech”) is a total solutions provider for burn-in, manufacturing and printed circuit board assembly (“PCBA”) and engineering services for the semiconductor, electronics, life sciences industries and other emerging industries.

Its core business segments include Burn-in Services, Manufacturing and PCBA Services, and Engineering Services. Avi-Tech's clients include Original Equipment Manufacturers, in semiconductor automotive, networking, and industrial products.

For both FY2019 and FY2020, Avi-Tech has distributed special dividends worth 0.5 Singapore cents per share. This resulted in the rise of its dividend payout ratio to 84.7% and 71.6% respectively.

However, with the decline in earnings in FY20201, Avi-Tech decreased the amount of gross dividend by 25% to just 1.5 Singapore cents per share and did not declare any special dividends.

Avi-Tech’s share price last traded at S$0.395, with a market capitalization of S$67.56 million.

2) Delfi Limited (SGX: P34)

Headquartered in Singapore, Delfi Limited (“Delfi”) manufactures and/or distributes branded consumer products that are sold in over 17 countries including Indonesia, Singapore, Malaysia, Hong Kong, Australia, Thailand, the Philippines and China.

Delfi has an established portfolio of chocolate confectionery brands which are household names in Indonesia. Its flagship brands in Indonesia include “SilverQueen” and “Ceres” that were introduced in the 1950s and “Delfi” in the 1980s. In addition, the Group also distributes a portfolio of well-known agency brands in Indonesia, Malaysia and the Philippines.

For the past few financial years, Delfi’s total dividend per share has been fluctuating between 2.57 and 3.19 Singapore cents.

Despite the 40% year-on-year decline in its earnings for FY2020, its total dividend per share only declined marginally by just 1%. This resulted in the sharp rise in its dividend payout ratio to 84.4%.

Delfi’s share price last traded at S$0.765, with a market capitalization of S$467.53 million.

3) Hong Leong Finance Limited (SGX: S41)

Listed on the Singapore Stock Exchange in 1974 as the then Singapore Finance Limited, Hong Leong Finance Limited (“Hong Leong Finance”) is the financial services arm of the Hong Leong Group Singapore.

Its core business involves taking deposits and savings from the public and providing financing solutions and services that include corporate and consumer loans, government assistance for SMEs, corporate finance and advisory services.

For both FY2018 and FY2019, Hong Leong Finance’s total dividend per share remained the same at 15.0 Singapore cents despite the 13% year-on-year decline in earnings. This resulted in the rise of dividend payout ratio to 65% in FY2019.

However, with the onset of the COVID-19 pandemic, earnings have dropped drastically and hence the sharp decline in total dividend per share to just 9.0 Singapore cents. This translates into a dividend payout ratio of 63%.

Hong Leong Finance’s share price last traded at S$2.41, with a market capitalization of S$1.07 billion.

4) Maxi-Cash Financial Services Corporation Limited (SGX: 5UF)

Maxi-Cash Financial Services Corporation Limited (“Maxi-Cash”) is the first public-listed pawnbroker in Singapore (listed on 22nd June 2012). Maxi-Cash provides financial services in the form of pawnbroking and the retail and trading of good value pre-loved jewellery, timepieces and Citigems, brand new 916/999 Gold.

For the past few financial years, Maxi-Cash's total dividend per share has been on a rising trend. This can be seen from the rise in its earnings across the same period.

For FY2018, its total dividend per share stood at 0.95 Singapore cents and has since grew to 2.6 Singapore cents in FY2020.

In terms of its dividend payout ratio, Maxi-Cash is more than willing to distribute out more than 90% of its earnings across the past few financial years, as reflected on the table above.

Maxi-Cash’s share price last traded at S$0.176, with a market capitalization of S$182.14 million.

5) Tai Sin Electric Limited (SGX: 500)

Tai Sin Electric Limited (“Tai Sin”) is a cable and wire manufacturer and dealer. Tai Sin operates three cable manufacturing plants. They are located in Singapore, Malaysia and Vietnam, all of which are fully equipped with the latest manufacturing facilities and technologies to meet increasing demands.

Its business segments include Cable & Wire (“C&W”), Electrical Material Distribution (“EMD”), Switchboard (SB), Test & Inspection (T&I) and Others.

Tai Sin’s dividend payout ratio has been on a declining trend since FY2019, as seen from the table above. For FY2019, its total dividend per share stood at 2.25 Singapore cents, which translates into a payout ratio of 83.6%.

Fast forward to FY2021, its total dividend per share was kept at the same level, and given the rise in its earnings, this resulted in the decline in its payout ratio to nearly 60%.

Tai Sin’s share price last traded at S$0.405, with a market capitalization of S$186.40 million.

Conclusion

As you can see from the above examples, an increase in earnings can lead to higher dividend payouts even if the dividend payout ratio remains constant. Hence, it is a useful metric for assessing a dividend’s sustainability.

One thing to note is that companies with a dividend payout ratio of 100% or more over the long run may face the situation where it has to either cut/stop dividends or borrow money for dividends – both of which give a very poor impression of how the company is run.

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