Analysts are bearish on SATS in the short term, but lowered share price and the potential for strong recovery could make the stock a good idea for long-term investors.
If you’ve ever taken a plane from Changi Airport, then you’ve definitely experienced SATS Ltd before.
That’s because the company (commonly abbreviated as SATS) is the chief ground-handling and in-flight catering service provider at Singapore Changi Airport, controlling about 80% of the ground-handling and catering business.
That’s a whole lot of in-flight meals served and luggage hauled!
Alas, SATS isn’t doing so well these days, what with planes continuing to be grounded and nations disagreeing on how best to safely reopen borders even as COVID-19 rages on in the background.
What does this all mean for SATS share prices (which was easily one of Singapore’s best-performing blue-chip stocks pre-pandemic, with reliable dividend yield averaging 4% per year)?
To help you find out, this article will cover:
- SATS share prices in the past five years
- How much dividends will I receive?
- SATS dividends payout schedule
- What risks do I face?
- What does the future hold for SATS?
SATS share prices in the past five years
|SATS (S58)||Share price|
Between the halcyon years of 2017 and early 2020, S58 was holding steady at around S$5 per share – fuelled, no doubt, by steady demand from the air travel sector.
Then – as you’d already know – along came COVID-19 in what will surely be remembered as a watershed year by the entire aviation sector in 2020.
Share prices dove in response, and for SATS, at one point plunging to a chilling S$2.75 in Jul 2020 (that’s a nearly 50% drop, for a multi-billion dollar, multi-national company!) – as airport terminals emptied and airlines were forced to ground their fleets.
After a few months of continued uncertainty, the stock managed to mount a rally towards the end of 2020, rising to the S$4 mark.
This could be attributed to two factors: the Singapore government’s explicit statements on how they will continue to support the national carrier (which will also benefit core service providers like SATS) through the crisis, and SATS’ own strong financial results posted for the reporting periods immediately prior to the pandemic.
Today, the share price continues to trade at the S$4 level, grappling with a modest loss of around 14%. But truthfully, things could be much worse.
How much dividends will I receive?
|Gross dividends (cents per share)||19||18||17||16||14|
If we consider the total gross dividends per annum received by shareholders from 2015 to 2019, we see an average yield of 4.03% per year.
As far as Singapore blue-chip stocks go, that’s a respectable yield, enough to secure S58 a place among the top five stocks with the highest dividend yields.
But unfortunately, the latest round of results is likely to see a hit.
So far, for FY 2019/20, SATS has announced a preliminary dividend of six cents, with another disbursement expected later in the year.
However, judging by the weakened results for the period (the organisation posted negative earnings of nearly S$80 million for 2021), dividend yield is likely to be negatively impacted as well.
SATS dividends payout schedule
|Dividends pay date(s)||8 Aug, 11 Dec||7 Aug, 6 Dec||11 Aug, 8 Dec,||10 Aug, 8 Dec||12 Aug, 4 Dec|
If you happen to hold SATS shares, you can expect to receive dividend payouts twice a year.
Both tranches of dividends are paid out in the second half of the year, with the first payout taking place in August, and the second one in December.
This has been the payout schedule in the past five years and will likely continue, barring any major operational or organisational changes.
What risks do I face?
Let’s take a closer look at the five-year price action of S58.
You’ll notice two characteristics of the price of the stock: there is a significant account of volatility throughout the year, but the share price remains relatively stable at around S$5 (pre-pandemic) and S$4 per share.
The peaks and troughs we see in the price throughout the year are likely to be caused by seasonal factors, such as increase in air travel during the year-end holiday season. This price volatility makes this stock rather risky for trading.
However, you’ll also notice that the share prices always tend to not exceed a dollar each way. This is what allows the stock to generate consistent returns year upon year, which is what you want in a dividend-yielding stock.
Hence, the way to optimise your returns on S58 is to add some into your portfolio and wait to reap the returns.
And if you’re thinking of taking the plunge, know that SATS holds an ‘Outperform’ rating on SGX, indicating that analysts expect the company to produce a better rate of return than similar companies.
What does the future hold for SATS?
Being a major player in the aviation support services sector, the fate of SATS is pretty much tied to the entire air travel sector.
While the future remains unclear for now, analysts are cautious about the near-term performance of the company (rightly so).
If planes continue to be grounded and air travel continues to be curtailed, SATS (and others like it) could very well continue to see revenues suppressed.
This would, no doubt, affect the stock’s ability to furnish the consistent returns shareholders have come to expect, which could lead to further negative developments.
However, the fact remains that current stock prices are about 15% to 20% lower, which could be enough justification for those with a long-term timeline of three to five years, or more.
Read these next:
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The Ultimate Guide To Buying Stocks In Singapore (2021)
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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.