Telco companies have traditionally been seen by investors as defensive stocks. This is because they tend to be companies that can generate good cash flow and profits through the infrastructure and customer base that they have.
Also, since telecommunication is an essential service that people need, regardless of how the economy is performing, most telco companies are thought to be defensive stocks that can weather bad times.
In Singapore, there are currently three companies on the Singapore Exchange (SGX) that we can invest in if we want to gain exposure to the telco sectors. The companies are Singtel (Z74), StarHub (CC3) and NetLink (CJLU).
For this edition of 4 Stocks This Week, we take a look at the stock performance and the dividend yields of these telco companies.
Singtel (Z74)
Singapore Telecommunications Limited (SGX: Z74), or Singtel for short, is the largest telco in Singapore with 4.1 million mobile customers in Singapore.
Besides Singapore, Singtel also has investments in regional markets such as AIS in Thailand, Airtel in India, Globe in the Philippines, and Telkomsel in Indonesia. AIS, Globe and Telkomsel are the top telcos in terms of market position in their respective countries while Airtel is number two in the South Asian country. Singtel also fully owns Optus, the second-biggest telco in Australia, behind the leader Telstra.
In its FY2023 results announcement, Singtel announced a net profit increase of 14% for the year to S$2.23 billion as compared to FY2022.
Singtel has a dividend policy that aims to pay dividends at between 60% to 80% of underlying net profit. From 2018 to 2021, its dividend payout has declined from 20.5 cents per share in 2018 (inclusive of a one-off special dividend of 3.0 cents) to 7.5 cents as of 2021. In 2022, the dividend increased to 9.3 cents. In 2023, the dividend payout also increased to 14.9 cents (inclusive of a 5.0 cent special dividend).
As of 28 July 2023, Singtel share price is $2.66. Excluding the special one-off dividend of 5.0 cents, the dividend yield is currently at about 3.7%. The company currently has a market capitalisation of about $43.9 billion.
Read Also: Why Do Older Singaporeans Who Never Bought Stocks Have SingTel Shares In Their CPF Account?
StarHub (Z74)
In its FY2022 results announcement, StarHub (Z74) reported a Service Revenue of $1.9 billion and Total Revenue for the year at $2.3 billion. This is a 17.2% and 13.9% increase compared to the previous year. However, due to impairments and higher operating expenses, net profit for the year declined by 58.3% to $62.2 million. Without them, the net profit would have been $114.2 million.
For its 1Q2023 results announcement, the company was able to report a net profit of $37.5 million, a 26% year-on-year increase as compared to the same period last year.
For dividends, Starhub pays semi-annually and FY2022 dividends are at 5.0 cents per share. Based on its current share price of $1.04, this gives it a dividend yield of about 4.8%. The company also expects to distribute a minimum of 5.0 cents per share as dividends for FY2023.
StarHub’s current market capitalisation is about $1.78 billion.
NetLink NBN Trust (CJLU)
NetLink (CJLU) isn’t a telco. Rather, it builds, owns and operates the passive fibre network infrastructure for homes and non-residential premises and non-building address points (NBAP) in Singapore. This is the same fibre network that the other telco providers (i.e. Singtel, StarHub, M1,) use to provide broadband access to you. It has approximately 1.3 million residential end-user connections and more than 45,000 non-residential end-user connections.
In its latest FY2023 results announcement, NetLink saw an increase of 6.8% in its revenue to $403.5 million for the year. Net profit after tax is up 19.7% for the year to $109.3 million.
NetLink’s distribution policy is to distribute at least 90% of its distributable income to the Trust after setting aside reserves and provisions. This is done on a semi-annual basis. In its last two distributions for FY2023, the dividend payout was 2.62 each. The total dividend for FY2023 is at 5.24 cents.
Based on its current share price of $0.86. the dividend yield is currently at about 6.09%. Its market capitalisation is currently at about $3.33 billion.
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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.
