Singtel (Z74); StarHub (CC3); NetLink (CJLU): Local Telcos Dividend Yield And Share Price Performance

Telecommunications companies, often referred to as telcos, have long been regarded by investors as defensive stocks. This perception is rooted in several fundamental aspects of the industry that contribute to these telcos’ financial stability and resilience, even in challenging economic conditions.

One of the primary reasons telcos are considered defensive stocks is their ability to generate stable cash flow and consistent profits. This stability stems from substantial investments in infrastructure such as cell towers, fibre-optic networks, and data centres. These assets form a robust foundation that supports reliable service delivery to a broad customer base. Moreover, telcos typically operate on a recurring revenue model, where customers subscribe to services like mobile phone plans, internet access, and cable television. This model ensures a steady income stream as subscribers make regular monthly payments for essential communication services.

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 examine the stock performance and 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 invests 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 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 FY2024 results announcement earlier this week, Singtel announced that its net profit for FY2024 is down 64% to $795 million due to an exceptional loss of $1.47 billion due to non-cash impairment charges on goodwill and Optus Enterprise’s fixed network asset. Excluding these charges, underlying net profit was up 10% to $2.26 billion.

Singtel’s dividend policy aims to pay dividends between 60% and 80% of underlying net profit.

From 2018 to 2021, its dividend payout 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 payout increased to 9.3 cents. In 2023, it also increased to 14.9 cents (including a 5.0 cent special dividend). For 2024, dividends increased once again to 15.0 cents (inclusive of a 3.8 cent value realisation dividend). Singtel says this is the third dividend increase since the strategic reset three years ago.

Source

As of 24 May 2024, Singtel’s share price is $2.42. Excluding the Value Realisation Dividend of 3.8 cents, the dividend yield is currently about 4.6%. The company has a market capitalisation of about $40 billion.

Read Also: Why Do Older Singaporeans Who Never Bought Stocks Have SingTel Shares In Their CPF Account?

StarHub (Z74)

In its FY2023 results announcement, StarHub (Z74) reported that its net profit had increased 140% to $150 million as compared to FY2022 when it was affected by impairments (net profit would have been $114.2 million in FY2022 if not for the impairments). StarHub also reported FY2023 Service Revenue of $1.99 billion, a 5.5% growth compared to FY2022. According to StarHub, the company registered real growth across all metrics and business segments.

For its 1Q2024 results announcement, the company reported a net profit of $40.1 million, an 8.1% increase compared to the same period last year.

StarHub pays dividends semi-annually, and FY2023 dividends are at 5.0 cents per share. Based on its current share price of $1.04 as of 25 May 2024, this gives it a dividend yield of about 4.0%. 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 $2.18 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 FY2024 results announcement, NetLink saw an increase in revenue by 1.9% to $411.3 million. Net profit after tax was $103.2 million, 5.5% lower than in FY23.

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 semi-annually. In its last two distributions for FY2024, the dividend payout was 2.65 each. The total dividend for FY2023 is 5.3 cents.

Source

Based on its current share price of $0.87, the dividend yield is about 6.09%. Its market capitalisation is about $3.39 billion.

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