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Willie Keng, CFA

Willie Keng, CFA

Chief Editor

Forget Singtel: Here’s One Singapore Telco-Linked Stock With Better Dividends

This Singapore dividend stock has a reliable pay out. But more importantly, it monopolizes the entire fibre optics network business.
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There’s nothing exciting about Singapore dividend stocks.

Yet they make great “passive income” investments.

This company delivers ultra-high-speed internet to every corner of Singapore.

Netlink Trust (SGX:CJLU) is a S$3.7 billion fibre optics network operator.

It owns and operates equipment — ducts, manholes and thick underground cables — that powers our WiFi hotspot at home.

Fibre optics is the technology that sends internet data from one point to another, using a thin strand of glass.

It’s that golden thread that weaves the fabric of a smart nation.

In total, Netlink Trust runs more than 76,000 km of these thick cables. 

That’s the total distance you would have drove a car from Singapore to India, 13 times.

This Singapore dividend stock has a simple but boring business

I’d say this is a simple but boring business.

Yet, Netlink Trust plays a crucial role in Singapore. 

It allows big telco operators — M1, Singtel, Starhub and MyRepublic — to provide their data services.

On a bigger scale, Netlink Trust has a mission-critical business.

According to Infocomm Media Development Authority (IMDA), Singapore wants to become a smart nation.

This means the government wants to deploy sensors and monitoring devices to support new technology.

This includes self-driving cars, surveillance cameras and even weather data collection.

Even cloud-based businesses need Netlink Trust.

With Singapore going 5G, I cannot imagine my day without any internet connection.

You’ll agree with me you’ll get frustrated if your internet is down.

But what’s more interesting is this.

 

Netlink Trust dominates its own market

Netlink Trust monopolizes the entire fibre optics infrastructure industry.

And I doubt competition with Netlink Trust come up anytime soon.

You see, Netlink Trust connects fibre network to almost all of Singapore’s household.

And connects close to 40% of non-household places. 

That’s dominance.

This is also the reason why Singtel had to divest Netlink Trust in 2017.

This was to prevent Singtel from monopolizing the entire fibre optics network infrastructure.

Don’t forget, you have other telco operators — M1, Starhub and MyRepublic — that need to transmit their data services.

They rely on Netlink Trust’s fibre optics network.

It creates room for safety and growth.

And that’s how Netlink Trust can grow its free cash flow year after year.

In fact, Netlink Trust grew its free cash flow from negative S$22 million in 2016, to positive S$204 million in 2021.

On top of all these, Netlink Trust grew revenues from S$257 million in 2016 to S$368 million in 2021.

And more than doubled earnings from S$40 million to S$94.8 million over that same period.

Because Netlink Trust is a business trust, it gets to distribute at least 90% of its earnings as dividends.

As a business trust, Netlink Trust can reduce its corporate income tax as long it pays out most of its earnings as dividends.

This Singapore stock has a reliable dividend pay-out

That’s why this business can pay you high, steady dividends year after year.

After its IPO in 2017, it has paid steady dividends between 4.88 cents and 5 cents per unit.

In its latest financial results, it paid out 5.08 cents per unit. 

That’s a 5.3% dividend yield today.

Here’s the other thing.

Netlink Trust’s business is so stable, I’d think of its stock like a bond.

Since 2017, its share price is rock-solid. 

This is important for dividend investors like myself.

Even during the COVID pandemic last year, Netlink Trust’s shares was resilient.

It rebounded as quickly as it fell back in March 2020.

Not only that, Netlink Trust pays you much more than the yield on your Singapore government bond.

Netlink Trust dominates the fibre optics network in Singapore. 

I don’t think this business will ever go out of favour.

In my opinion, this business trust has a mission-critical role in Singapore’s growth as a smart nation.

This should be a tailwind for its Netlink Trust’s shares and steady dividend payouts.

Sometimes, investing can be simple. 

Always here for you, 

Willie Keng, CFA

Founder, Dividend Titan

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Willie Keng, CFA

Willie Keng, CFA is the founder of Dividend Titan, a financial publication for self-managed investors. A former research analyst for top private banks, Willie today runs his own consulting firm. Some of his clients include asset managers and family offices. Willie has a deep passion for helping everyday investors take control of their financial future. And has spent over 10,000 hours researching, analyzing and recommending investment ideas.

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KSH
KSH
1 month ago

Thanks. You commentary would have been a lot more meaningful if you had also addressed the possible repricing of its services in the coming year, as well as its stated plans possible acquisitions. Without those, the picture seems a little incomplete

TMH
TMH
28 days ago

Yes, if I remember correctly, Netlink Trust does not have that much power to adjust their fees as it is decided by the regulators.. That is the only true downside I can think off.

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