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Dividend Idea: SATS – Singapore Airport Terminal Services

August 3, 2008 by Kyith Leave a Comment

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.

  1. SATS served 40 airports in inflight catering and ground handling.
  2. SATS dividend payout have been increasing steadily the past few years
  3. SATS have a good free cashflow position. This is due to the need for low capital expenditure and consistent operating cashflow.
  4. 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.

Filed Under: Dividend Investing, Singapore Stocks Tagged With: air travel, airline, airport, airports, business point, capital expenditure, cashflow, cts, div, dividend payout, dividend stock, Dow, economy, free cashflow, Gap, inflight services, ING, investor, operating cashflow, sentiments, sia, Singapore, singapore airport, singapore airport terminal services, solutions provider, st engineering, term investor, us, USI

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