SATS Ltd, an airport and food services provider, is likely to increase its dividend in the coming years, as the company is expected to expand margins with its various businesses showing strength, according to Maybank Kim Eng.
"SATS announced special dividends in the last three years and we expect this to be the new normal," Maybank said in a research note on Thursday.
"We expect ordinary DPS (dividend per share) to increase by 1 cent over each of the next three years, which could be achieved with a very comfortable average payout ratio of less than 80 percent."
SATS may benefit from growing air travel in Japan on the back of a weaker yen. Its various other businesses in the catering, food and beverage segments will help the company achieve economies of scale, Maybank said.
Maybank upgraded its call on the stock to "buy" and set the target price at S$3.90.
SATS shares rose to a six-year high of S$3.36 in the previous session. They were down 0.04 percent at S$3.32 on Thursday. Its shares have gained nearly 15 percent this year, lagging the Asia-Pacific sector index's 19 percent rise.