Under plans laid down last year, Singtel will be paying so-called value realisation dividends (VRD) partly from proceeds of the asset divestments, in a bid to improve returns for shareholders.
The VRD is on top of a core dividend that Singtel will continue paying.
Jearajasingam estimates that the higher divestments will help support dividend yields of more than 5% "at least" into FY2028.
Besides the dividend commitment, Singtel is launching a $2 billion share buyback programme that can help support earnings per share.
However, Jearajasingam points out that this extra boost to returns will not be indefinite.
"While there is room for SingTel to pay out more in VRD to optimise its balance sheet, we concur with management that there needs to be a sustainable trajectory to dividends to avoid a sharp fall in dividends (and share price) when the VRD ends," he says.
In his view, Singtel will see a cap on further upside to its share price, which is now trading at 21.6x FY2026 earnings, more than 1 s.d. above its post-2009 trading range - unless there is further "sizeable" asset sale, such as additional selling of its stake in Bharti, its associate in India.
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Jearajasingam, citing the company's management, says that Singtel has no plans to "significantly" reduce its stakes in any of its core associates.
This leaves its 7.7% stake in Thailand's Gulf Development, worth $2.3 billion or 14 cents per share, as an added monetisation target, which Jearajasingam figures is already included the revised asset recycling target of $9 billion.
Jearajasingam believes that further upside for Singtel is capped by its earnings-based valuation, while the yield of 5% is a support against further downside.
Singtel shares changed hands at $3.95 as at 11.36 am, up 0.51%.
