Top 3 Singapore dividend stocks to watch

Below, we examine the dividend outlook and share price fundamentals of UMS Holdings, Venture Corporation and Wilmar International.

Although many Singapore-listed companies witnessed dividend cuts in their most recent financial updates, these three stocks have managed to buck the trend by raising their dividends per share (DPS).

In this article, we examine their fundamentals, as well as what top investment analysts say about their dividend and share price growth potential for the rest of the financial year.

UMS Holdings (SGX: 558)

Semiconductor equipment manufacturer and service provider UMS Holdings declared higher dividends in its latest financial report released on 13 August 2020.

The firm, whose clientele includes US chip supplier Applied Materials, raised its interim DPS (Q2 FY2020) by 100% to S$0.01, up from the S$0.005 paid out in the same period a year ago.

In addition to the three earlier dividend amounts paid out earlier this year – bringing the total DPS so far this FY2020 to S$0.045 – this represents a dividend yield of 4.5% so far, which is already higher than FY2019’s final yield of 3.5%.

With at least one more dividend expected to be proposed, the final dividend yield for FY2020 could wind up close to FY2018’s yield of 5.5%.

CIMB analyst William Tng wrote that the growth outlook for the company’s earnings in the next three financial years appears positive, thanks to its main customer Applied Materials’ own ‘bright’ prospects.

As such, he raised UMS’ FY2020-2022 earnings per share forecast by 8.8% to 17.8%.

He also predicts that UMS will revert to its historical full-year DPS of S$0.06, ‘given its rising free cash flow’. Finally, he raised his share price target on the stock to S$1.10 from S$0.96 previously, while lowering his rating from a ‘buy’ to ‘hold’.

DBS’ Lee Keng Ling wrote that UMS’ potential dividend yield of 5% is attractive based on a S$0.06 DPS forecast.

She raised her price target to S$1.37 (up from S$1.04) per share while maintaining a ‘buy’ rating.

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Venture Corporation (SGX: V03)

Technology service provider Venture Corp also proposed higher dividends recently, despite reporting lower earnings for the first half of fiscal 2020.

The company, whose clients include Fortune 500 companies, proposed an interim shareholder DPS of S$0.25 per share on a one-tier tax-exempt basis for the reported period.

This works out to be 25% higher than the S$0.20 paid out in H1 2019. Dividend yield for 2020 also stands at 3.72% so far, higher than that 2019’s eventual yield of 3.47%.

RHB brokers maintained a ‘neutral’ rating on Venture, but raised their target price by 26% to S$19 a share from S$15.10 previously.

They cited several reasons for the share price target increase, including higher profit after tax and minority interest predicated on the firm’s optimism regarding a continued recovery, as well as higher year-end dividends for fiscal 2020.

‘Assuming the final dividend remains unchanged, FY20F DPS will likely increase to S$0.75 from S$0.70, representing a 4% FY20F yield. We think this highly sustainable, and shareholders will likely continue to enjoy higher dividends if its performance continues to improve,’ the analysts wrote in an 11 August 2020 note.

On the flipside, they noted that key risks to the stock’s performance include decelerating economic growth, and a worsening of the US-China trade war.

Looking even further ahead, CIMB’s Tng noted that Venture’s growing net cash balance sheet supports his 3.72% dividend yield forecast for the next three financial years.

He raised his share price target on the stock to S$20.14 from S$16.78 previously, on an ‘add’ call.

Wilmar International (SGX: F34)

Crude palm oil producer Wilmar International raised its interim DPS for the first half of 2020 by 33% to S$0.04 per share, after it reported a 50% year-on-year improvement in net profit to US$610.9 million (S$829 million) for the six months ended 30 June 2020.

This is compared to a DPS amount of S$0.03 paid out in the first half of 2019.

In addition to the first dividend payment of S$0.095 paid out in June this year, this brings Wilmar’s dividend yield for fiscal 2020 to 3.1%.

This is the stock’s highest dividend yield since it first started paying out dividends in 2007.

Even more notable is the fact that a special dividend of S$0.10 is expected to be declared from the proceeds of the company’s initial public offering (IPO) of its Chinese subsidiary Yihai Kerry.

The IPO is expected to raise an estimated 13.8 billion Chinese yuan (S$2.73 billion), which RHB analyst Juliana Cai says will translate into roughly S$0.43 per ordinary Singapore share.

As such, Cai has reiterated a ‘buy’ rating on the stock alongside a share price target of S$5.45. This represents an upside of nearly 26% from the most recent traded price of S$4.33.

Maybank’s Thilan Wickramasinghe also envisions that special dividends will be released, contingent on the funds raised from the IPO.

Additionally, he raised his 2020-2021 profit-after-tax estimates by 1-14%, citing improving operating conditions in China and other key markets.

As such, he raised his price estimate for the stock by 27% to S$5.24 from S$4.12 while maintaining a ‘buy’ recommendation. This represents an upside of 21%.

How to trade Singapore stocks with IG

Are you feeling bullish or bearish on the Singapore stocks mentioned here? 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 <UMS Holdings Ltd>, <Venture Corp Ltd>, or <Wilmar International Ltd> 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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