How Much Dividends Will You Receive As An SIA Shareholder After A 3-Year Hiatus?

The SIA group has declared it will pay its first round of dividends after three years. The group has previously suspended their dividend payout during the COVID-19 pandemic after the aviation industry was gravely hit by global travel restrictions.

What should you expect as an SIA shareholder?

An interim dividend will be issued to shareholders at 10 cents a share. The dividends will be paid out to shareholders who bought SIA stock before the ex-dividend date of 9th Dec 2022 (one working day before the release date of 12th Dec 2022). This means that if you have 50,000 shares of SIA stock, you will expect to receive S$5,000 in dividends.

The dividends will be credited to the bank account linked to your CDP account on the 22nd of December. For individuals using trading platforms such as Tiger Brokers where your stocks are held in a holding account, the dividends will be automatically paid to your account within a few days after the platform has received it.

Singapore follows a single-tier corporate tax system. SIA Group is responsible for paying taxes on its profits prior to issuing a dividend. Hence, the burden to pay the tax is on the company and the dividend you will receive will be tax-exempt.

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SIA Group’s Financial Results

Part of the SIA group’s successes was its proactive approach to preparing for travel to resume when travel restrictions were lifted post-lockdown. Their initiatives to fundraise, retain talent and deploy resources allowed them to be one of the first carriers to launch flights and start sales when the Singapore government made the decision to reopen their borders earlier last year, starting with the Vacinated Travel Lanes (VTLs) in September 2021.

SIA and Scoot carried 11.4 million passengers between April to September 2022, a 14 times increase from the same period the year before. By July - September 2022, passenger capacity rose to 68% of pre-pandemic levels.

As a result in April to September 2022, passenger flown revenue increased by 694% year on year to S$5.979 billion. This was due to an 11-fold increase in traffic and a 66.8% increase in passenger load factor.

Cargo revenue also increased by 11.9% despite a decline in cargo loads due to an increase in prices. Altogether, this translated to an increase in group revenue of 197.7% from S$2.817 billion in April to September 2021 to S$8.416 billion in the same period this year.

This is the first time since the pandemic that the SIA group has paid out a dividend. This is because of their strong balance sheet, with cash reserves rising steadily on the back of a strong recovery in the demand for passenger air travel. This is a good sign for the group as this suggests that they are in a good financial position and have the ability to give back to their shareholders.

SIA Group Going Forward

The SIA group has benefited from the uptick in passenger travel demand. Travellers are booking flights in droves following 2 years of being unable to go on holiday. This trend of “revenge travelling” has given SIA substantial pricing power, allowing them to charge higher prices for their airfares. This is the main contributing factor behind the group’s highest-ever quarterly operating profit.

However, there are some headwinds for the aviation industry. The cost of jet fuel is currently very high, During the pandemic, jet fuel demand plummeted to near zero. This pushed a lot of refineries to switch off their production of jet fuel. It is not easy to switch refineries back on or change what they are producing. As the demand for travel has picked up in recent months, the demand for jet fuel has outpaced its supply. This could have an impact on SIA’s total expenditure, which would eat into their profit margins.

Furthermore, the high demand for passenger air travel at the moment is a reflection of pent-up demand from people not being able to travel for the last few years. This level of demand is likely to temper in the long run. High cost-of-living inflation and a possible oncoming global recession may further diminish demand for passenger air travel in the near future.

Conclusion

Our national carrier has weathered the worst of the pandemic and is positioned to do well due to booming passenger travel demand. The issuance of interim dividends in 2022 is a signal towards its strong cash balances. If you think that SIA is a good fit for your portfolio, check out the best online brokerages and trading platforms to start your investment journey.

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