Is Singtel a good dividend stock?

One investment analyst still likes Singtel’s dividend potential, giving a worst-case dividend yield of 3.9% in 2021.

  • What is the update on Singtel's share price?
  • What is the stock's current 12-month price target and rating?
  • What is the expected dividend yield for Singtel?

Singtel stock analysis: what is the update?

Since our last update, shares of Singapore Telecommunications (Singtel) (SGX: Z74) have fallen further to a low of S$2.28 each – the lowest since March 2020’s trough.

As at 10:45 SGT on Tuesday 25 August 2020, Singtel shares are trading at S$2.30 each on the IG platform.

As previously reported, the stock’s current bearishness has come on the back of lower-than-expected Q1 operating revenues.

The telco posted an operating revenue of S$3.54 billion for the first quarter ended 30 June 2020, 14% lower than that of Q1 2019/2020’s S$4.1 billion. The reported figure also missed analyst estimates of S$3.62 billion by 2.3%.

Share price fell as much as 7% subsequently.

IG’s market analysis shows that ‘buys’ form 55% of all trades on the Singtel counter today and 59% of all trades across the week so far.

Additionally, 94% of client accounts also currently hold ‘buy’ (long) positions on the stock, indicating an expectation for Singtel’s share price to rise in the immediate term.

Are you ready to trade Singtel shares?

Start today by opening a live or demo IG trading account.

Singtel’s current price target equates to 33% upside

Despite the present share price weakness, top investment analysts still envision significant upsides for the stock in the next 12 months.

Singtel currently has a 12-month consensus share price target of S$3.06, alongside an average rating of ‘buy’ – based on a Bloomberg poll of 17 brokers.

The price target represents an upside of roughly 33% from the last traded price.

Although RHB analysts on 18 August 2020 downgraded their target price on the stock to S$3.20 per share from S$3.40 citing the company’s worse-than-predicted earnings, they still maintained a ‘buy’ recommendation.

While the analysts also cut their FY2021 to FY2023 full-year core earnings by 12% to 14%, they nevertheless predict that there will be ‘some earnings respite’ in the second quarter of 2021 with ‘mobility restrictions progressively easing’.

JP Morgan’s equity research team reiterated an earlier price target of S$2.65 with a ‘neutral’ rating, stating that they see ‘limited near-term catalysts’.

However, the researchers noted that there are some key upside factors that could lift share price, including a stabilisation in Singapore mobile revenues, an improvement in Australian enterprise sales, as well as a strengthening of the AUD/SGD.

Why one analyst called Singtel a ‘dividend play’

Meanwhile, Morningstar analysts presented the most bearish price target of the lot at S$2.30 per share (down from S$2.55 previously) on a ‘narrow moat’ (hold) rating, citing Singtel’s reduced market share in both Singapore and Australia as a main driver of the downgrade.

‘Moreover, Optus is struggling for profitability after removing the one-off NBN payments. We retain our narrow moat rating for the company but would recommend investors wait for a better price to buy,’ they concluded.

Nevertheless, Morningstar has rated the stock at a price-to-earnings ratio of 18x, which is still slightly above its 10-year average.

The firm also reiterated the stock’s dividend potential – calling it a ‘dividend play’, putting their base case at S$0.09 per share in fiscal 2021.

This figure would give the blue-chip an annual dividend yield of 3.9%. Singtel’s dividend yield for the last financial year ending 31 March 2020 was roughly 7.5%.

How to trade Singtel with IG

Are you feeling bullish or bearish on the Singtel stock? 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 Ltd (SGX)> 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

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