Right now Singapore Airlines Limited (C6L.SI / SIAL.SI) share price is at SGD$5.480

At this price, Singapore Airlines Limited is valued at price-to-book ratio of 1.027 and a trailing distribution yield of 0.000%

With the current valuation, would I invest in it?

Let’s go through it using my 7 steps guide and see how I pick the Best Singapore Dividend Stocks.

Disclaimer: Information should be used for entertainment purpose only. Full disclaimer below.

SIA - 5 Year Share Price (Sep 2021)

Singapore Airlines Limited (C6L.SI / SIAL.SI) 5 Year Chart

Year 2017 to 2021

As a quick recap, here are the 7 steps I use to pick the best Singapore Dividend Stocks.

  1. Debt to Equity Ratio
  2. Dividend Yield
  3. Dividend payout ratio
  4. EPS Growth Rate
  5. Return of Equity (ROE)
  6. Price-to-Book Ratio
  7. MOAT

Business Background

SIA was founded in 1947 and have it’s headquarter in Singapore. Singapore Airlines Limited is a subsidiary of Temasek Holdings (Private) Limited.

Singapore Airlines Limited, together with subsidiaries (SATS, SIA Engineering, etc.) provides passenger and cargo air transportation services.

SIA Group Airlines

Airline route network:

  • 105 destinations
  • 37 countries

SIA have 20 subsidiaries which includes:

Operating fleet as of 2020

  • 203 aircraft (196 passenger aircrafts and 7 freighters)

Singapore Airlines is a member of the global Star Alliance. As one of the world’s premium airlines,  Singapore Airline have a young and modern fleet.

Singapore Airline Cabin

DEBT TO EQUITY RATIO

Check for: Less than 0.5 D/E Ratio

Looking at the latest annual report for Year 2020.

SIA have a D/E ratio of 0.901.

This is higher than 0.5 D/E Ratio.

D/E ratio of more than 0.5 will means that the company is overleverage and might be a red flag if you are going invest in low risk stocks.

With a D/E of close to 1.0, which means the debt is just as much as the equity in the company. This is a very unhealthy balance sheet.

To understand this stock better, I’ve done a quick look at the past Debt to Equity Ratio for SIA:

SIA
Year 2017 2018 2019 2020 2021
Debt to Equity (D/E) Ratio 0.120 0.243 0.501 1.265 0.901

It seems to me that the D/E ratio have been <0.5 before 2019 before the pandemic hits the aviation industry.

2020 have been the worst year for SIA where the amount of debt exceed the equity of the company by over 26.5%.

The D/E ratio have started to drop in 2021, but it is still >0.5.

This huge variation of the D/E Ratio is probably due to the pandemic.

I will probably guess that, with the pandemic, it have negatively impacted the company to increase it’s ability to generate higher revenue and income.

If we are looking just at the D/E ratio, the company have a high risk of the company defaulting.

My Opinion: Fail

Dividend Yield

Check for: More than 2.5% dividend yield

For Year 2021, SIA pay a dividend of SGD 0.00 which is about 0.00% in dividend yield.

SIA did not pay any dividend for the year 2020 and 2021.

This is lower than my target of 2.5%.

Looking at the distribution history, the dividend payment stop from 2020, which is probably due to pandemic.

SIA
Year 2017 2018 2019 2020 2021
Dividend (TTM) 0.21 0.38 0.30 0.00 0.00

For dividend stocks, I’ll prefer it to increase in it’s dividend distribution year-on-year and not having this huge fluctuation.

The dividend yield is also much lower than the risk free rate (CPF OA Account) of 2.5%. I will give it a verdict of fail.

My Opinion: Fail

Dividend Payout Ratio

Check for: Less than 80% dividend payout ratio

At the time of writing, a quick check using some of my favorite online stocks info tools shows that the dividend payout ratio for SIA is a big fat 0.00% which basically make this section non-applicable.

When the payout ratio is 0%, it means the company doesn’t payout any dividend for the financial year. The company is not suitable for dividend investing.

Although a company is not suitable for dividend investing, it maybe suitable for growth investing.

Nonetheless, SIA fail this section.

My Opinion: Fail

EPS Growth Rate

Check for: More than 10% EPS Growth

Earning Per Share (EPS) helps to analyze the profitability and quality of a stock.

Here, we will like to see an EPS growth of 5 years or more.

Quick check on the 2021 financials.

The EPS 5 year growth rate is “Blank”!

There is no Earning Per Share (EPS) for SIA in 2021!

When the EPS growth rate is blank, it means the company is not having any earnings, thus it is unable to have any growth rate.

Yup, the EPS for SIA is non-existent!

This means, the company is losing the shareholder’s value.

The cause a “blank” EPS growth rate is probably due to the pandemic, but I will not invest in a company that is losing money.

My Opinion: Fail

High Return Of Equity (ROE)

Check for: More than 10% ROE

ROE is one of the most important ratio used by Warren Buffett.

Return of Equity is used to measure the management’s ability to make a return on our investment.

At the time of writing, the ROE of SIA have an ROE of -33.868%.

A deep dive into the history of SIA shows it usually have an ROE of -33.9% to 10%.

SIA 2018 2019 2020 2021
Return on Equity (ROE) 10.0% 5.2% -0.19% -33.9%

A negative ROE is bad. A ROE of around -33.9% means that it is losing shareholder’s equity at 33.9% per year.

My Opinion: Fail

PRICE-TO-BOOK RATIO

Check for: P/B Ratio of less than 1.8

SIA is one of the most renowned company with world class airlines which tops the best airlines in the world.

With so much attention on SIA, the price of the stock will most likely be traded above it’s valuation (book value).

But due to the pandemic, it have impacted it’s business.

At the time of writing, the current P/B ratio of SIA is 1.027.

Meaning, it is trading at around its book value.

My Opinion: Pass

MOAT

Check for: Not just having a MOAT, but a great MOAT

SIA is the leading world class airline which service most countries in the world.

Singapore Airlines is a Certified 5-Star Airline for the quality of its airport and onboard product and staff service.

Product rating is determined by

  • Cabin seats
  • Amenities
  • Food & beverages
  • IFE
  • Cleanliness
  • Service (Cabin staff and ground staff)

Long Haul

  • First Class
  • Business Class
  • Premium Economy
  • Economy Class

Short Haul

  • Business Class
  • Economy Class

Airline industry is a highly competitive industry.

Top 10 airlines for 2021

  1. Qatar Airways
  2. Air New Zealand
  3. Singapore Airlines
  4. Qantas
  5. Emirates
  6. Cathay Pacific
  7. Virgin Atlantic
  8. United Airlines
  9. EVA Air
  10. British Airways

SIA is current ranked No.3 in the best airline to travel.

SIA is known for the stellar service standards by flight attendants. The airline is famous for it’s luxurious flight experiences across cabin classes, range of in-flight entertainment options, spacious cabins and an overall pleasant flight experience.

SQ Girls is SIA’s visual advertising slogan applied to depictions of flight attendants of Singapore Airlines (SIA) dressed in the distinctive sarong kebaya SIA uniform.

According to Phil’s book Rule#1 investing, SIA have the “Brand MOAT”.

Brand MOAT, can be an attractive MOAT, especially in the space where life and death matters. It allows you to price your product higher than your competitors while still able to win the business.

In my opinion, SIA’s Brand MOAT is pretty strong.

My Opinion: Pass

Overall

SIA have a final score of 4/10.

With no dividend payout, no earning thus no EPS growth rate, and a negative ROE, I don’t think this will be a good dividend stock for me to buy.

Personally, I think the pandemic will continue impacting the company for the near foreseeable future as the pandemic rages worldwide.

Below is how I’ve scored SIA.

My SIA’s Score Card as a Dividend Stock
Metrics Weightage Score
Debt to Equity Ratio High (2) 0
Dividend Yield Low (1) 0
Dividend payout ratio Low (1) 0
EPS Growth Rate Low (1) 0
High Return of Equity (ROE) Low (1) 0
Acceptable Price-to-Book Ratio High (2) 2
MOAT High (2) 2
Total 4

Why do I find some metrics more important than others?

There are 3 attributes in a company that Warren Buffett wants in particular:

  • Wonderful Company at Fair Price
  • Stable & Understandable Business
  • Vigilant Leadership on Risk Management

This translate to the following 3 metrics I have in my list:

Thus, for these metrics, I will put a higher weightage in my scoring.

Question.

Would you invest in this now?

Disclaimer/ Disclosure: I may or may not own some of these stock that is written in my website. I am NOT a Financial Advisor or a Lawyer. The content on this site, or YouTube channel, or any other sources are for educational purpose only. I merely cite my own personnel opinion and is not intended to be personalized investment advice. ​What I've written here is part of my online diary on my investing journey. The information might be wrong and inaccurate. You must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won't experience any loss when investing. I will not be liable for any loss you've make. You should always do your own due diligence and consider your financial goals before investing in any stock.

Smarter Everyday Library

Want to Support Us?

Share with your friends on Facebook or Twitter if this help them too.

This will motivate us to write even more amazing articles to help you in building wealth in the future!

Check out our Latest Blog Post Here.

Yes! I want to learn Powerful Wealth Strategy!




What are your thoughts?

%d bloggers like this: