Is Starhub (CC3:SI) a good stock to buy for a dividend portfolio?

If we're looking at dividend stocks, what we want is price stability (gradual appreciation) and good dividend yield (5% or more).

If we look at the 2017 Annual Report, net profit has been falling continuously for the past 3 years. Meaning that there's negative growth over the last few years.

Next, a quite check at The Wall Street Journal's screener shows 58.8% drop in share price over the last 5 years. SingTel being blue for comparison.

While you may have 9% dividend yield, your paper loss from fall in price may very well offset any gain from dividends.

With many new competitors (circle.Life, Zero, My Republic...) and the low entry barrier, market share for Starhub is bound to fall, ceteris paribus. With Singapore's internet and smartphone penetration rate both more than 80%, the room for growth locally is rather weak. I find the outlook rather bleak. Unless there are more concrete plans for the near future, personally I would refrain.

TL:DR;

it's a NO NO because quote " they’re actually burning through about S$50 million per quarter by maintaining their existing dividend policy. There’s 244.0 million cash left as at 30 June 2018, so if we assume that they don’t take on new financing to pay dividends, they can maintain the existing dividend for another 5 quarters before they deplete their cash position entirely.

If we assume that Starhub cuts their dividend down to the point where they are cash flow neutral, it implies about a 35% cut in dividend to a 6.0% yield. That’s actually still very respectable, and I suspect that’s what the market is pricing in. I am mind blown that Starhub doesn’t immediately cut their dividend, but continues to burn through S$50 million of their cash reserves each quarter, when as DBS pointed out, they could easily be deploying this cash into their core business.

Bottom line, don’t buy this stock expecting a 9.4% dividend. It will get cut, the only question is when, and how much. "

Unless you want to consider it as a bonus and if they cut to 6% yield, then it could be a hold for short term till they do cut. It is certainly not a long term telco counter to hold.

Source:

https://financialhorse.com/starhub/