3 Singapore Stocks That May Deliver a Dividend Surprise in 2022
Countries around the world have begun easing travel restrictions.
Denmark and Austria became the latest countries to do so, following similar moves by the UK, Ireland, and the Netherlands.
The decision to reopen the borders has happened amid Omicron cases that have yet to peak..
That’s because the latest variant has been certified as being less severe by the US Centre for Disease Control and Prevention (CDC).
As such, the tourism, airline and hospitality sectors should see a much-needed recovery this year.
Amid better prospects, some may also have the ability to restore their dividend payments.
Here are three Singapore stocks that may start declaring a dividend this year.
Singapore Airlines Limited (SGX: C6L)
Singapore’s flagship carrier, Singapore Airlines Limited, or SIA, was one of the worst-hit companies during the pandemic.
With border closures and the curtailment of air travel to halt the spread of the virus, SIA had to quickly declare a massive rights issue in March 2020 to shore up its balance sheet
Nearly two years on, the airline has managed the crisis well by tapping on multiple sources of liquidity to stay afloat.
The latest such move was the issuance of 3.375% notes due 2029 as part of its S$10 billion multicurrency medium term note programme.
SIA has also supported the Singapore government’s vaccinated travel lanes (VTLs) since September last year.
The demand for air travel was so strong that it caused the airline’s website to crash in October.
The carrier recently reported that it carried 596,300 passengers in December 2021, a seven-fold increase compared to December 2020.
To be sure, the airline reported a half-year loss of S$836.8 million for its fiscal 2022’s first half (1H2022).
However, the loss was significantly lower than the massive S$3.5 billion loss it incurred a year ago.
Effective cost-cutting measures have also reduced its cash burn rate to just S$106 million for 1H2022, down sharply from the S$1.7 billion in 1H2021.
The last time the airline paid out a dividend was S$0.08 per share for 1H2020 (i.e. period ended 30 September 2019), before the onset of the pandemic.
Should conditions improve further, there could be a dividend declared by SIA for 1H2023.
SATS Ltd (SGX: S58)
SATS is a leading provider of gateway services and airline catering for airlines, food service chains and retailers.
The group counts SIA as one of its largest customers and has customers in more than 55 locations in 14 countries.
Similar to the airline, SATS also halted its dividend payments in the latter part of FY2020 as the pandemic spread across the world.
Things are beginning to look up for the ground handler, though.
During its recent Capital Markets Day, SATS shared that it was pivoting successfully away from travel-related revenue by expanding the reach of its Food Solutions division.
At the same time, it will also grow its cargo division, which saw tonnage jump by 64% year on year in 1H2022.
For 2Q2022, revenue jumped by 27.2% year on year to S$293.9 million while the group eked out a small core net profit of S$6.8 million.
If the business momentum builds up for SATS, it could generate sufficient free cash flow to resume its dividend payments.
ARA US Hospitality Trust (SGX: XZL)
ARA US Hospitality Trust is a hospitality stapled group that owns a portfolio of 41 select-service hotels across 22 states in the US.
The trust was listed in May 2019 and only paid out a single distribution of US$0.0421 before it decided to halt distributions in light of the pandemic.
The reopening in the US has further boosted ARA US Hospitality Trust’s performance since 2020.
It reported a 34.4% year on year rise in gross revenue to US$52.8 million for 1H2021 and chalked up net property income of US$9.1 million, reversing a loss of US$2 million in 1H2020.
According to its 1H2021 slides, revenue per available room (RevPar) and occupancy rates have also hit a six-month high since the beginning of 2021.
No doubt these numbers should be even better for 2H2021 the recovery gathered pace.
The trust will release its FY2021 earnings in the evening of 23 February and investors may see it resume its distributions should its financial numbers improve further.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
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