Singtel vs ST Engineering: Which Dividend Stock Is Better for the Next 10 Years?

The Smart Investor07:30

Singapore Telecommunications Ltd (SGX: Z74), or Singtel, is a telecom giant reinventing itself around digital infrastructure, while Singapore Technologies Engineering Ltd (SGX: S63), also known as ST ...

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MF","LU0589944569.HKD":"ALLIANZ EMERGING ASIA EQUITY \"AT\" (HKD) ACC","LU1211504680.USD":"ALLIANZ HIGH DIVIDEND ASIA PACIFIC EQUITY \"AM\" (USD) INC","LU1839390173.USD":"JPM ASEAN EQUITY \"A\" (USD) INC","LU1105468828.SGD":"Allianz Total Return Asian Equity AM DIS H2-SGD","LU0251143029.SGD":"Fidelity ASEAN A-SGD","LU1282649067.USD":"ALLIANZ ASIAN MULTI INCOME PLUS \"AMG\" (USD) INC A"},"translate_title":"新加坡电信与 ST Engineering：未来 10 年哪只股息股票更好？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"S63.SI":1.95,"Z74.SI":1.97},"content_text":"Singapore Telecommunications Ltd (SGX: Z74), or Singtel, is a telecom giant reinventing itself around digital infrastructure, while Singapore Technologies Engineering Ltd (SGX: S63), also known as ST Engineering, is a diversified aerospace-and-defence group riding structural global tailwinds. \n\nBoth pay solid dividends.\n\nThe real question for a decade-long holder isn’t today’s yield; it is which business can keep growing earnings, cash flow and dividends sustainably, over a long period of time. \n\nSingtel: The Case for a Long-Term Dividend Investor\nOther than Singtel’s core telecom businesses in Singapore and Australia (Optus), it also owns stakes in regional telecom associates. \n\nAdditionally, Singtel has a burgeoning digital arm spanning IT services (NCS) and data centres (Nxera). \n\nAn important component of Singtel’s future growth is likely to come from rising dividend contributions from its regional associates — these payments can swing Singtel’s earnings and cash flow disproportionately.\n\nNxera and NCS are riding strong cloud and AI demand, which should feed through to both the top and bottom lines. \n\nFinally, management’s continued divestments are freeing up cash to repay debt, fund NCS’s and Nxera’s expansion and still return money to shareholders. \n\nST Engineering: The Case for a Long-Term Dividend Investor\nST Engineering’s business spans three arms: commercial aerospace (CA), defence and public security (DPS), and urban/smart-city solutions. \n\nIts growth drivers are likely to be the CA and DPS segments. \n\nCA benefits from global aviation passenger and cargo volume growth, and an ageing fleet needing ever more maintenance. \n\nMeanwhile, DPS is riding a trend of rising government spending worldwide, under long-term, recurring revenue contracts. \n\nFinally, the urban/smart-city solutions segment is tapping into the digitalisation trend, but its earnings contribution remains sparse for now. \n\nDividend Showdown: Which Stock Pays More?\nAt a share price of around S$4.49, and with its annual dividend of S$0.185 per share (S$0.051 coming from asset disposals) for its financial year ended 31 March 2026 (FY2026), Singtel has a trailing yield of 4.1%.\n\nST Engineering’s share price is near S$10.50 and yields 2.3% with its trailing dividend of S$0.24 per share. \n\nIts yield is much lower than Singtel’s, but its dividend is growing faster. \n\nIts latest interim of S$0.05 per share for the second quarter of 2026 is a 25% increase from a year ago. \n\nSince 2017, Singtel’s total dividend has grown by just 6% while ST Engineering’s has grown by 53%. \n\nA higher yield today doesn’t make it the better decade-long holding; yield on cost matters more than the starting yield. \n\nIf ST Engineering keeps raising its payouts at this pace, a buyer today could earn a materially higher effective yield on their original outlay within five years. \n\nFree Cash Flow: Which Company Has the Stronger Dividend Engine?\nThis matters most because cash (not accounting profit) funds a dividend. \n\nSingtel’s FY2026 operating cash flow (OCF) was S$4.9 billion (including S$1.2 billion of associate dividends). \n\nAfter S$2.4 billion of capital expenditure, Singtel’s free cash flow (FCF) was S$2.5 billion, which was short of the S$2.9 billion in dividends paid out. \n\nThe shortfall is covered by Singtel’s S$3.9 billion recycled from asset sales.   \n\nST Engineering’s FCF for 1H2026 (ended 30 June 2026) tells a stronger story: OCF was S$959.8 million and capex was S$368 million, leaving FCF of S$591.8 million to fund dividends of S$470 million. \n\nFCF also represents a cash conversion ratio of ~156% against net profit.\n\nCan each company fund its dividend from recurring cash while investing for growth? \n\nSingtel: not quite – hence the need for capital recycling. \n\nST Engineering: comfortably and organically with real headroom to spare. \n\nEarnings Growth: Which Business Has More Room to Compound?\nSingtel’s underlying earnings growth is real – 27% for the quarter ended 30 June 2026 (1QFY2027), excluding currency movements. \n\nBut a meaningful slice of reported profit came from one-off gains on stake sales, not recurring operations; organic growth is more modest than the headline at 21%. \n\nST Engineering’s growth looks more repeatable: CA and DPS both grew EBIT (earnings before interest and taxes) by double digits, and its order book is at a record of S$35.7 billion as of 30 June 2026. \n\n\nThe order book gives years of revenue visibility, removing much of the “will orders show up” uncertainty. \n\nBalance Sheet and Financial Strength\nSingtel has been actively deleveraging. \n\nIts net debt to EBITDA ratio has declined from 1.5 to 1.3 over the past year, helped by asset sales, giving flexibility for further investment or returns. \n\nST Engineering is more levered than Singtel with S$4.7 billion of borrowings against cash of just S$293 million on the balance sheet. \n\nBut the interest coverage ratio (ICR) remains decent at around 9x.  \n\nST Engineering’s balance sheet seems more levered compared to Singtel, which could constrain the former’s dividend growth if rates stay elevated or a large acquisition arrives. \n\nWhich Dividend Is More Sustainable?\nJudge both on four tests. \n\nPayout ratio: Singtel’s core payout ratio stands at 80% of underlying earnings; ST Engineering’s is lower, with more room. \n\nFCF payout: Singtel’s dividend exceeds FCF, as shown above, leaning on divestments; ST Engineering’s dividend tracks its FCF more conservatively. \n\nBalance sheet resilience: Singtel is deleveraging; ST Engineering has thinner headroom.\n\nReinvestment: Singtel’s heavy capex funds real growth; ST Engineering reinvests continually in capability and bolt-ons. \n\nSingtel’s dividend seems less sustainable (reliance on asset sales) compared to ST Engineering. \n\nGrowth vs Income: The Two Stocks Offer Different Trade-Offs\nSingtel’s strengths include an attractive yield, deep regional exposure to the telecoms industry, a burgeoning growth angle from digital infrastructure, and potential benefits from continued asset realisation.\n\nIts main weaknesses include operating in a mature, competitive telecom industry, heavy capital intensity, and earnings that lean on associates it doesn’t fully control.\n\nST Engineering’s strengths include the structural CA and DPS tailwinds, good diversification, and strong order book visibility.\n\nIts main weaknesses are its higher valuation, potential execution risks, alongside exposure to government spending cycles. \n\nValuation: Which Stock Offers Better Value Today?\nST Engineering trades near 30x forward earnings, which is already pricing in years of flawless execution. \n\nSingtel, at roughly 21x forward earnings and a 4.1% yield, looks cheaper on paper; the question is whether that yield compensates for a slower-growing business. \n\nNeither screams cheap compared to its historical average. \n\nCould Investors Own Both?\nGenuinely, yes. \n\nThe two provide different exposures – Singtel to telecom, associates and digital infrastructure; ST Engineering to aerospace, defence and technology – so holding both diversifies an income portfolio across different industries and cycles. \n\nJust weigh that against your total exposure to Singapore equities and what else you already hold.\n\nHowever, monitor key factors that could change each investment thesis:\n\n\nFor Singtel: Associate earnings, core telecom performance, digital-infrastructure growth, capital-recycling pace, net debt, and dividend policy.\nFor ST Engineering: Order book, aerospace margins, defence contract wins, free cash flow, and large acquisitions that could reset leverage.\n\nGet Smart: Look Beyond the Yield\nSingtel and ST Engineering offer two genuinely different routes to long-term dividend investing. \n\nSingtel suits an investor wanting more income today and a stake in its regional and digital-infrastructure turnaround; ST Engineering suits one betting on structural aerospace, defence and tech growth, trading a smaller yield now for faster compounding later. \n\nThe better 10-year holding hinges on dividend sustainability, earnings growth and valuation playing out well – not on which pays more this year. \n\nChasing the higher yield is the wrong question; finding the business that can keep growing its payout is the right one.\n\nOne of these six companies is the only one legally allowed to operate in Singapore. It has increased its dividend for 16 consecutive years. Discover which one it is in our free report here.\n\nFollow us on Facebook, Instagram, Telegram and YouTube for the latest investing news and analyses!\n\nDisclosure: Wilson H. does not own shares of any companies mentioned.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":false,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"isVideo":false,"video":null,"symbols":[],"gpt_button":0,"need_auth":false,"need_login_tip":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"isLaohu8Offline":false,"tenantId":"TBGLOBAL","deviceId":"web-server-community-laohu8-v3","version":"4.49.0","shortVersion":"4.49.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2665360656","isCrawlerRequest":true}