Sembcorp Industries have been in the doldrums, but a strategic push into sustainable solutions could be the key to restoring the shine of this long-standing investor favourite.
Singaporeans may know Sembcorp Industries as one of the city’s most crucial urbanisation partners, fulfilling pivotal roles in water and waste management, energy and renewables, as well as urban development.
But did you also know that Sembcorp is active well beyond the borders of Singapore, and manages several major projects across Asia, China, UK and as far away as the Middle East?
On the investment front, Sembcorp Industries is listed on the Singapore Stock Exchange. Not only that, it is also a component stock of the Straits Times Index.
So, is this blue-chip stock a worthy addition to your portfolio?
To help you find out, this article will cover:
- Sembcorp Industries share prices in the past five years
- How much dividends will I receive?
- Sembcorp Industries dividends payout schedule
- What risks do I face?
- What does the future hold for Sembcorp Industries?
Sembcorp Industries share prices in the past five years
|Sembcorp Industries (U96)||Share price|
Truthfully, the last five years have not painted a pretty picture in terms of stock prices.
Sembcorp Industries share prices have been on the decline since early-2018, dropping from a high of S$3.47 to S$2.29 by end Dec 2019 – and that’s before COVID-19.
When the pandemic struck, share prices were driven even lower, to S$1.47 by end-May 2020. And then, after a short-lived rally, the stock saw a five-year low of S$1.28 in mid-September.
Share prices have since made a modest recovery, climbing back up to S$1.93 at the time of writing.
At current levels, shares of U96 remain depressed, at around 30% lower compared to five years before.
While no shareholder wants to see their holdings decrease in price, a drop also represents an opportunity to buy more shares at a discount. This could potentially generate greater returns at some point in the future.
Whether you should buy more shares or not depends on how strongly you believe in Sembcorp Industries ability to turn things around from here on out.
How much dividends will I receive?
|Gross dividends (cents per share)||6||3||4||4||7|
During its heyday in the 2010s, it was not uncommon for U96 to give out as much as 22 cents per share, achieving a dividend rate of 11.58% (in 2014).
Unfortunately, the stock is rather more subdued these days, managing an average dividend rate of only 2.53% (or 4.8 cents per share).
Dividend payout rates for 2018 to 2020 were particularly low, reflecting the struggling share prices of the period.
Of note, in 2020, the second dividend payout took the form of mandatory scrip distribution at the rate of 4.911 new securities for every share held.
But there is a slim ray of hope shining over the horizon. In 2021, dividend payouts managed to rise to 6 cents per share, breaking the 3% mark.
Yes, it’s not as exciting as during the good old days, but it’s at least enough to put Sembcorp Industries back in the running for Singapore’s top blue-chip stocks in terms of dividends ranking.
Sembcorp Industries dividends payout schedule
|Dividends pay date(s)||27 Apr, 16 Aug||26 May, 9 Sep (Scrip)||24 Apr, 21 Aug||25 Apr, 14 Aug||24 Apr, 15 Aug|
Shareholders of U96 can expect dividend payouts twice a year.
The first tranche is usually paid out in April or May, with the second tranche in August or September.
One thing to note is that Sembcorp Industries tend to pay out dividends within the same year. This allows you to receive payouts that are aligned with the group’s most current financial results.
What risks do I face?
As we discussed earlier, U96 has fallen rather far from its once-vaunted status as a must-have dividend stock on the Singapore Exchange.
Hence, if you had been relying on Sembcorp Industries dividends to fund your lifestyle, you very likely have been feeling the pinch for a long time.
Holding on to the stock bears the risk of continued depressed dividends, and therefore requires a change in strategy.
You could take advantage of the current low share prices to pursue a value-investing strategy with this stock.
Or, you could double down and buy up more shares, in the hopes of reaping a windfall when dividend payouts climb back to healthier levels. However, whether this scenario will bear out is anyone’s guess, but that’s the risk inherent in every investment.
No matter which way you cut it, U96 remains a solid stock to buy. SGX’s consensus rating puts the stock at ‘Outperform’, meaning that Sembcorp Industries is expected to furnish a better rate of return than its peers, even if it may be a while before it regains its top-tier status.
What does the future hold for Sembcorp Industries?
Although Sembcorp Industries have seen declining results in the past five years, there’s good news in the pipeline.
For instance, the organisation managed an impressive earnings growth of over 500% in the past year. And this positive trend is expected to continue, with earnings growing nearly 25% per year from here on.
This strong development is thought to result from Sembcorp Industries making further inroads into sustainability and climate change, with Reuters reporting that the group’s new sustainable solutions portfolio is expected to make up 70% of profits by 2025.
Furthermore, the renewable energy portfolio is targeted to achieve a compound annual growth rate (CAGR) of 30%, while its integrated urban solutions portfolio is expected to achieve a CAGR of 10%.
This is certainly a step in the right direction, especially as the world is urgently looking for solutions to slow down global warming and reverse course on the damage wrought on the environment.
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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.