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Singtel’s dividend cash outflows expected to ‘more than halve’ in 2021

Singtel recently saw its credit outlook drop from ‘stable’ to ‘negative’ due to its recovery being viewed as more uncertain than regional peers.

  • Singtel continues to be one of the most actively traded stocks on the Singapore Exchange, two weeks after its digital full bank licence win
  • Last week, the telco saw its credit outlook get reduced from ‘stable’ to ‘negative’ by S&P Global Ratings
  • The agency said that Singtel’s performance was ‘hit harder’ than expected
  • It forecasts that dividend cash outflows will more than halve to about S$1.3 billion in FY2021 from S$2.86 billion in FY2020

Singtel share price: What’s the latest?

Singtel was one of the top three most active counters on the Singapore Exchange on Thursday (17 December 2020), experiencing a trade volume of over 12 million by mid-day.

As at 14:00 SGT, Singtel shares are trading at S$2.35 apiece.

Singtel’s credit rating fall to ‘negative’?

Last Tuesday (08 December), US credit rating agency S&P Global Ratings lowered its credit outlook for the group from ‘stable’ to ‘negative’, so as to ‘reflect the company’s deteriorating leverage’.

The agency said in a press release that the group has been ‘hit harder than we expected by the Covid-19 pandemic and weakened economic conditions’. It added that Singtel’s performance was hit with a larger decline than its regional peers.

That’s because Singapore and Australia (its two main markets) are more mature markets with limited growth potential. Structural decline in its business, including strong competition within Singapore and Australia, also impacted performance.

Moreover, earnings in Singtel’s Australia subsidiary Optus have also been impacted by the implementation of the National Broadband Network in Australia.

S&P Global projects that Singtel’s adjusted EBITDA will decline by 11%-13% in fiscal 2021 and remain below pre-Covid levels in fiscal 2022, with government support schemes expected to ‘taper off’ in the second half of FY2021.

As such, they noted that Singtel’s recovery will be more uncertain than other telcos, stating that ‘a significant improvement in Singtel’s performance depends, to a large extent, on the return of some normalcy in operating conditions’.

What’s the impact on dividends?

In terms of dividend payouts, S&P Global wrote that ‘continuing competition and a need to maintain high capital outlay to deploy advanced networks could constrain the ability of Singtel’s regional associates to pay more dividends to the parent’.

As such, they anticipate that Singtel’s cash dividends from associates will be S$1.4 billion annually in fiscal 2021 and 2022, largely flat from fiscal 2020.

The group also announced a reduction in its final dividend shareholders in May 2020, and again in November 2020 with interim payouts - applying a scrip dividend scheme to both rounds.

Consequently, the agency forecasts that cash outflows from dividends will more than halve to about S$1.3 billion in fiscal 2021 from S$2.86 billion in fiscal 2020.

In response, Singtel said: ‘Singtel and Optus' credit ratings are strong and we remain financially disciplined and committed to maintaining our investment-grade credit ratings.’

How to trade Singtel with IG

Are you feeling bullish or bearish on Singtel’s stocks?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Singapore Telecommunications> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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