ST Engineering
Price target:
RHB “buy” $4.25
CGS-CIMB “buy” $4.00

Consistent dividend of at least 4% a year
Few stocks are like ST Engineering, consistently maintaining a dividend yield of 4% or more over the years. Even with the significant exposure to the Covid-19-hit aerospace sector, the company is able to keep its full-year payout of 15 cents per share. Analysts such as RHB’s Shekhar Jaiswal and CGS-CIMB’s Lim Siew Khee are not expecting this to change any time soon, even though the engineering business reported 10% y-o-y drop in earnings for FY2020 ended December 2020. The stronger bottom line was aided by some $350 million in government grants, with another $100 million expected for FY2021. But with less government support this year, management plans to further cut around $180 million in costs.

“We remain optimistic on 2021’s earnings recovery — aided by order delivery normalisations across all business segments. A y-o-y higher order backlog, robust balance sheet, and ability to generate positive free cash flow and sustain dividend payments supports our call on the stock,” says Jaiswal in his Feb 22 report, where he has a price target of $4.25 on the stock.

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