Recent Buy – SGAPY


I couldn’t let May get too far gone before making my first purchase.  Singapore Telecom was purchased May 2nd at $26.47 (USD).  This is an ADR with a 10:1 ratio, meaning each ADR share has 10 Singtel shares as its’ basis.  Based in Singapore, its operations span the globe with significant operations Australia, Thailand, India, Africa, Philippines and Indonesia.

They pay a semi-annual dividend on an interim/final schedule (roughly January and August).  Since 60-70% of earnings are paid as dividends, Schwab calculates the yield as 6.4%.  Being a little more conservative, my assumption is for a minimal final bump this year due to their debt, so my yield assumption is 3.56%.

So why add to my holdings?  Singapore has roughly a 70% broadband penetration rate which the government wants to increase via an infrastructure program.  (Sound familiar?)  The primary beneficiary of this will likely be Singtel as their majority owner is the government (sound even more familiar?).

Their debt?  Partially inflated by the off-balance sheet transactions to prepare for a government mandated divestiture of 75% of NetLink Trust by April 2018 (the Fiber Broadband unit).  This past month Morgan Stanley, DB and UBS were engaged to run the IPO.  My guess is if shares are not spun off, debt will be paid down and a special dividend declared.  (Perhaps, my hope?)

Other than exchange rate exposure there is one other issue to consider.  Dividends paid are not ‘Qualified’ meaning they are taxable at the regular tax rate rather than the capital gains rate (US).  If into sheltering income from taxes, holding in an IRA may be preferable.

There remain six foreign stocks on my 2017 watch list.

Any thoughts?

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