A Guide To SIA Shares And Dividends

·6-min read

SIA stocks are rallying after the recent rights issue, but prolonged pandemic uncertainties could hamper long-term growth.

Singapore Airlines (SIA) is not merely our national airline, it is Singapore’s pride and joy. An icon that flies our flag high (literally), proving to the world that even a tiny country like ours can be a global leader.

But alas, COVID-19 has laid our beloved national carrier low.

In its heyday, Singapore Airlines not only served dignitaries, celebrities, royalty and the people, it was also seen as a reliable investment, capable of generating sustained growth.

Given the severe blow dealt to the aviation industry, how does SIA measure up as an investment today?

Here’s what we’ll discuss in this post.

  • SIA share prices in the past five years

  • How much dividends will I receive?

  • What risks do I face?

  • What does the future hold for SIA?

  • Closing thoughts

SIA share prices in the past five years

SIA (C6L)

Share price

2 Jan 2017

S$9.74

7 May 2021

S$4.95

Loss

49%

As expected, the deleterious pandemic has not been kind on our national carrier. Over a five-year period starting Jan 2017, share prices have tumbled by a heart-rending 49%.

However, there’s reason to be optimistic. After the announcement of full-year results for FY2020, the market saw a pickup in trading volume, and share prices have been trending upwards since May 2020.

<em>Source: https://www.sgx.com/securities/equities/C6L</em>
Source: https://www.sgx.com/securities/equities/C6L

How much dividends will I receive?


2019

2018

2017

2016

2015

Gross dividends (cents per share)

30

38

21

44

27

Yield

6.15%

7.79%

4.3%

9.04%

5.53%

Sources: https://www.dividends.sg/view/c6l

Unfortunately, SIA is not paying out dividends at the moment.

In early 2020, the carrier launched a rights issue to help secure more cash flow. The exercise saw over S$5.3 billion issued in new equity, with the aim of raising S$9.7 billion via mandatory convertible bonds. SIA stated that the new funds would go towards meeting capital and operational expenditure requirements.

However, if we take a look at our national carrier’s past performance in terms of dividend yields, we see that shareholders enjoyed yields of between 4.3% to 9.04% from 2015 to 2019, giving us a five-year average of 6.56%.

Bear in mind that this is well before any threat was posed by COVID-19, and the leisure travel sector was as healthy as it could be.

SIA dividend payout schedule

While there are no payouts announced at the moment, the following information may be helpful once SIA resumes paying dividends.

The airline operator pays out dividends twice a year, typically in August and December.

Judging by historic trends, these payouts typically take place after the first quarter business update, and the third quarter business update.

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What risks do I face?

Given the encouraging signs of recovery both in volume and price, you might be wondering if now is the right time for you to jump in and start buying SIA shares.

Well, do note that the uptick in activity is mainly carried by the rights issue launched on 5 June 2020, which means that the increased trading interest could be a natural reaction to investors jostling for their preferred positions.

It is simply too early to say for sure if a recovery is in the pipeline, and if so, how steep – or flat – it will be.

Hence, one of the biggest risks facing investors right now is the uncertainty of the future of air travel. This is compounded by further uncertainties in border restrictions, given the uneven vaccine rollout, and the troubling rise of COVID-19 variant strains.

What does the future hold for SIA?

While there is optimism that air travel will recover (the aviation sector is simply too important to our modern era of global interconnectivity), SIA (like all carriers) may have to grapple with an altered business environment which may create significant tripping stones on the way to full recovery.

Chief among these concerns is the fact that it is business travel, not leisure, that generates the bulk of the revenue for airlines – on some flights, as much as 75%. On average, a business-class ticket is twice as lucrative as one sold to coach.

Yet, given how the pandemic proved definitively that humans can just as effectively conduct business via telecommuting, companies are likely to reduce sending their executives abroad, reserving trips only for long-haul destinations or the most crucial purposes. This downward pressure on revenue will likely delay recovery.

Leisure travel, too, is likely to see lasting changes.

The threat of disruptions and sudden changes in itineraries could persist, prompting travellers to continue demanding guarantees in the form of refunds and booking flexibilities.

In turn, this could saddle SIA with a degree of uncertainty that may be reflected in share performance.

Closing thoughts

Perhaps this is just blind pride speaking, but I, for one, truly believe that SIA will once more soar to lofty heights as a global leader in air travel.

And I am sure that there are many more people who are cleverer, and more fiercely prideful than me of our beloved national carrier, working hard behind the scenes to see it take flight again. If there’s one thing Singapore is good at, it is solving problems, and doing so brilliantly.

Hence, while now is not quite the right time to start vacuuming up SIA shares, especially if you’re risk avoidant, you should definitely put this stock on your watchlist.

But if you’re more risk tolerant, buying into SIA shares now, while it’s at a historical low, could pay off handsomely.

Whether you decide to wait or jump right in, be sure to invest responsibly. Always consult a trusted financial professional, and never invest more than you can afford to lose.

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By Alevin Chan
An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.

The post A Guide To SIA Shares And Dividends appeared first on SingSaver Blog - We Compare, You Save.

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