Why ComfortDelGro Made the Cut, But SBS Transit Didn’t

Last week, I shared why I was excited to reinvest in Vicom Ltd (SGX: WJP).

As I extended my exploration of the Singapore land transport sector, I decided to also invest a similar stake in its parent company: ComfortDelGro Corporation (SGX: C52), or CDG.

Read on if you would like to find out why I only added CDG and not SBS Transit (SGX: S58).

Prefer to get the complete background first? My latest article on The Smart Investor, accessible via the image below, covers all three companies.

Among the three, I initially researched on SBS Transit as I was attracted to the tantalising trailing yield of near 10%.

It’s only upon closer look, that I realised that FY 2024 dividend of S$0.2868, included a special dividend of S$0.0841, that derived from the sale of the Soon Lee bus depot.

Even excluding the one-off special dividend, last year’s payout ratio for the ordinary dividends of S$0.2027 was unusually high at 90%. This differed the previous three years’ practice of paying out just 50% of its earnings.

Hence, I am not quite sure if it will still pay out so much dividends this year, especially when revenue and profits are likely to dip this year due to the loss of Jurong West bus package last August.

Moreover, given the nature of regulated business and the mature public transport landscape in Singapore, the growth prospects for SBS Transit are limited.

With the above in mind , I gave it a miss.

In contrast to SBS Transit, I wasn’t even considering CDG initially.

I was still stuck with the thinking that its taxi business was suffering from the disruption by Grab Holdings Ltd (NASDAQ: GRAB) and other ride-hailing companies.

And its overseas businesses faced many challenges, such as drivers shortage in Australia, lags in repricing in despite increasing cost and unfavourable forex.

However, as I delved deeper for The Smart Investor article, I uncovered significant improvements in CDG’s taxi and private hire segment’s profit margins in recent years.

Additionally, the Group is experiencing good momentum in its overseas business since last year (primarily due to acquisitions), and that has continued into the latest quarter, as shown in the images below.

Source: ComfortDelgro 1Q 2025 Business Update

While it’s too early to definitively conclude, the transition of CEO to Mr. Cheng Siak Kian in 2023 could be a significant factor driving this positive shift.

The current business momentum gave me some confidence that this is likely to be another good year for the land transport giant.

That means potentially higher earnings, which could translate into a higher dividend per share than last year’s S$0.0777.

Hence, purchasing a stake at a trailing dividend yield of 5.4% is a good deal for me.

Of course, the challenges from its overseas business remain.

But just as I deemed investing in stocks as a necessary calculated risk to grow my wealth, expanding in the overseas market is a long-term growth driver for CDG.

And if executed well and growth indeed returns, then we will be looking at potentially significant capital appreciation when CDG makes it back as one of the component stocks in the Straits Time Index.

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