3 Things You Should Know About SGX (S68)


SGX (S68) is one of Singapore's oldest blue-chip dividend stocks in the Singapore market. SGX is Asia's most international and connected exchange with about 40% of listed companies and over 80% of listed bonds originating outside Singapore. Singapore has always had a reputation for being one of Asia's most popular and successful financial hubs with an international stock market. Naturally, SGX has performed fairly well for itself over the past years. Their share price increased from $7.5 to a high of $10 over the past 5 years before decreasing to $9.1 due to the COVID-19 pandemic. There have been a few news articles recently about SGX's incredible performance and how it is a good blue-chip dividend stock to own. How exactly did SGX perform in 2020?
 

Record High Revenue in 2020.

SGX's revenue for FY2020 hit a record high of $1.05 billion which is a significant increase from its FY2019 revenue of $910 million. They achieved double-digit growths across all business units -Fixed Income, Currencies & Commodities, Equities, Data, Connectivity & Indices. SGX's net profit for FY2020 is an impressive $472 million (up 21% compared to FY2019) and their Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is $656 million (up 25% compared to 2019). Their Earnings Per Share was 44.1 cents (up 21% compared to 2019). SGX has a compound annual growth rate (CAGR) of 7% for its revenue and 8% for its net profit. Overall, SGX had one of its best financial performances in FY 2020 with a record-high revenue and net profit. This shows investors that SGX is constantly improving itself in terms of competitiveness and technological advancements to remain as one of the best stock exchanges in the Asian region. SGX can achieve such an impressive financial performance as it is constantly leveraging on its global networks and partnerships to engage and acquire new customers.






 

Long And Stable Dividend Track Record

SGX is one of Singapore's oldest blue-chip dividend companies and it has been consistently paying out dividends to shareholders since it listed on the stock exchange in 2001. SGX's 20-year consistent dividend history gives investors confidence that SGX will continue to pay dividends even in tough financial circumstances such as the current COVID-19 pandemic. SGX's average dividend yield for the past 5 years is 3.2% which is slightly lower than the average blue-chip dividend REIT (4-5%). Their dividend per share (DPS) over the past 5 years has been very stable and is gradually increasing. Their DPS was 28 cents in FY16 and FY 17, 30 cents in FY 18, and FY 19, and 30.5 cents in FY20 respectively. Although SGX's dividend yield is lower than the average blue-chip dividend REITs, it is unfair to compare as the business model for REITs and a company like SGX is very different. A company like SGX offers potential for more share appreciation at the cost of a lower dividend yield while REITs offer higher dividend yield at the cost of a lower share appreciation. SGX's stable and consistent dividend payouts are one of the reasons it is highly popular among dividend investors looking to diversify their portfolio with a stable blue-chip dividend stock that isn't a REIT.


Strong Balance Sheet and Technological Advancements

SGX has an extremely strong balance sheet with total assets worth $2.7 billion and total liabilities at $1.4 billion as of 29 June 2020. It is highly unlikely that SGX would have any significant cash flow problems in the future and be unable to pay shareholders their dividends. Moreover, SGX has constantly made technological investments in the past to advance its technology capabilities and enable a higher capacity for growth. SGX's technology capital expenditure for FY2020 is $41 million to enhance its key technology infrastructure, digitalized retail investor services, and upgraded Titan OTC commodities trade reporting system. SGX is proactively improving itself through technological upgrades and making its platforms more digitalized and consumer-friendly to ensure that it can remain relevant and be at the forefront for stock markets in Asia. This shows investors that SGX is not lacking behind and they have plans to ensure that they can maintain their reputation as one of Asia's top stock exchanges. SGX's strong balance sheet and proactive technological advancements are some of the reasons dividend investors love this blue-chip stock.


Verdict

In my opinion, SGX is a good blue-chip dividend stock with stable dividends if you are looking to diversify your dividend portfolio. Its impressive performance in FY2020 which made the headlines of many news articles reflects how SGX can remain relevant and maintain its reputation as one of Asia's most successful stock exchanges. It also shows how SGX is heading in the right direction and how it is constantly improving itself. However, if you are starting your dividend portfolio, you might want to consider higher dividend yield REITs first to get a higher return before adding lower dividend yield companies such as SGX in the future to diversify your portfolio.  


What are your thoughts on SGX's performance in 2020?


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