Airline Ground Services and Inflight solutions provider have really taken a beating together with SIA Engineering and ST Engineering.
What is common between the 3 of them? A high possibility that sentiments are against them due to the slowing of US economy and demand for air travel and maintenance.
However, i think as a long term investor we have a good play here.
- SATS served 40 airports in inflight catering and ground handling.
- SATS dividend payout have been increasing steadily the past few years
- SATS have a good free cashflow position. This is due to the need for low capital expenditure and consistent operating cashflow.
- From a business point of view, their association with SIA and SIA being a well-respected brand will filter down to SATS as well and together with their experience in inflight services and ground handling, should be a good dividend stock to own.
At current price of SGD1.83 the yield 7.6% on 14 cents of div. However, I am a bit cautious since the past average payout ranges from 10 cts to 7 cts. Based on that the yield is around 5.4%, which is hardly the best prospect when it comes to dividend counters.
However, if you believe SATS will improve their payout yearly, it may balance out SATS not having a 8-9% yield. You have to wait until it falls to SGD1.10 for it to have that kind of yield.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
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