Singtel Stock: Did Dividend Giant’s Latest Earnings Beat Expectations?

Singtel stock dividend

Tim Phillips

August 26, 2022

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In Singapore, one of the most well-known dividend investments has been to buy the stock of telecommunication companies. These are also known as “telcos”.

The biggest – by far – is Singapore Telecommunications Limited (SGX: Z74), or Singtel for short.

While it’s had a very poor run over the past decade, so far in 2022 Singtel shares are up over 14%.

Earlier this week, Singapore’s largest telco reported its Q1 FY2023 (for the three months ending 30 June 2022).

After its latest earnings, should investors in this dividend giant consider buying its stock? Let’s find out.

Net profit up over 40%

For Singtel shareholders, there was some good news. Primarily, this was the fact that net profit came in at S$628 million for the period – up 41% year-on-year.

However, the caveat was that number included an exceptional gain of S$129 million mainly due to the released of deferred gain on the disposal of its stake in ATN as well as Singtel’s share of net exceptional gain from Airtel.

Underlying net profit – a more accurate measure – came in at S$499 million, up 11% year-on-year. This came largely in line with consensus expectations for the quarter.

One of the redeeming features of Singtel’s business in recent years has been its holdings in other telco businesses around both Southeast Asia, India and Australia.

Known as its “regional associates”, this segment performed well in the latest quarter. Regional asscociates’ pre-tax profits of S$577 million was up 12% year-on-year (see below).

Singtel Q1 FY2023 associates profit

Source: Singtel Q1 FY2023 business update

Singtel’s stake in Airtel was a big contributor over the quarter as its performance in India was impressive on the back of tariff hikes and plentiful 4G additions.

Selling stake in Bharti Airtel

A day after its earnings announcement, Singtel revealed that it would be selling a 3.3% stake in Airtel for S$2.25 billion.

The company said that it expects a net gain of S$600 million from the sale, which will leave Singtel with a 29.7% effective stake in Airtel. That remaining stake is now worth an estimated S$22 billion.

The deal is expected to be completed before 23 November 2022. Singtel says it remains committed as a strategic investor in Bharti Airtel.

Evidence of an asset recycling initiative, the extra cash should help Singtel fund new investments while also supporting its dividend payments.

There continues to be new investments in areas such as 5G capex, regional data centres, and digital banking.

How many of these will produce future, meaningful revenue streams still seems unclear to me, though.

Dividend stock looking for consistency

For investors looking to secure a reliable dividend, Singtel might seem like an obvious choice. Yet the telco actually cut its dividend every year from FY2018 to FY2021.

In FY2018, the dividend per share (DPS) was 20.5 Singapore cents but this came down to 7.5 Singapore cents in FY2021.

Admittedly, Singtel did raise its DPS to 9.3 Singapore cents in FY2022 but the road to dividend recovery is long.

The recent Bharti Airtel stake sale does help provide more capital for a stable dividend in the near future but the consistency of Singtel’s growth strategy has yet to play out.

With a trailing 12-month dividend yield of 3.5%, Singtel doesn’t appear to be the most compelling income stock in Singapore’s market today.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.