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For long-term income investors, ensuring we buy stocks that pay out regular and sustainable dividends is an important attribute.
However, during times of market stress (such as now) it’s even more relevant. That’s because if we rely on dividends for income, we want assurances we will receive them.
Our worst nightmare as shareholders were if the dividend was cancelled or suspended – as HSBC Holdings plc (SEHK: 5) announced it would do in April.
Luckily, there are stocks that can still pay dividends even with reduced profits. What’s more, a dividend that pays us every three months is, I think, preferable to one that only pays out twice a year.
Thinking of that, here’s one relatively high-yielding stock in Singapore that pays shareholders dividends four times per year.
Banking on dividends
DBS Group Holdings Ltd (SGX: D05) is Singapore’s largest bank, with a market capitalisation of S$50.5 billion (US$35.77 billion). In recent years, it has focused on building out its digital capabilities as a bulwark against the rise of competition including digital banks.
It currently pays a dividend per share (DPS) of S$0.33 per quarter, meaning its annual DPS is S$1.32. At DBS’s share price of S$19.70 (at the time of writing), that gives investors an attractive yield of 6.7%.
The bank recently reported its first-quarter 2020 earnings and even though its net profit was down by nearly a third on larger provisions, there was still a lot to like.
It’s being responsible by taking a higher allocation for loan allowances going forward. That’s probably wise given the likely rise in defaults that will follow Covid-19 and the global recession.
In fact, its net profit before allowances was actually up 20% year-on-year to S$2.47 billion.
Committed to paying
However, even with reduced profits, DBS is committed to its DPS of S$0.33 for the quarter. How can it do this? The bank has strong fundamentals and is preparing itself for the headwinds likely coming its way.
Its loan-to-deposit ratio dropped to 83% while its liquidity coverage ratio (LCR) is robust at 133%. Its CET1 capital ratio remains strong at 13.9% – well above the 6.5% regulatory minimum.
Buying reliable income
Together with its fourth-quarter 2019 DPS of S$0.33, shareholders of record by the end of the day on 14 May (next Thursday) will receive S$0.66 in a distribution.
Both distributions will be paid out on 26 May (the fourth-quarter DPS was postponed this year until the AGM was carried out).
The bank used to pay shareholders twice a year (similar to UOB and OCBC, the other two large Singapore banks). However, in 2019 it changed this timetable to a quarterly payout and remains the only Singapore bank to do this.
For long-term dividend investors, DBS looks like a solid bet in the financial sector for reliable dividends in uncertain times.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Tim Phillips owns shares in DBS Group Holdings Ltd.