Investors often turn to blue-chip stocks for the earnings stability and solid annual dividends. However, not all blue-chip companies offer the same dividend prospects. An effective investment method would be to buy consistently and making use of dollar cost averaging to avoid over-exposure to stocks at high price levels. Over the long investment horizon of 10 years or more, consistent investments could bring the biggest yield to one’s investments portfolio.
**Banks**
DBS Bank, Singapore’s largest bank by assets has seen strong price performance gains during the year. Its dividend yield is currently hovering at slightly less than 3%, making it less attractive in terms of dividends returns. OCBC Bank, another local banking giant edged out DBS in terms of dividend yield at 3.17%. UOB Bank has the lowest among the big 3 banks in Singapore, offering only 2.87% annual indicative dividend yield based on last declared dividends and current closing prices as at 6 October 2017. Strong earnings growth were chalked up by the 3 banks, with DBS recording 8% net profit growth as at 2Q 2017, OCBC recording 22% jump while UOB notching 5.5% net profit gains as at 2Q 2017. Prices of these blue chip stocks have risen strongly during the year and depressed dividend yield. Investors should not be looking to pile heavily into these banking stocks when yield is depressed. U.S. is on track to raise interest rates in 2018 and interest rate hike will have negative price consequences which will pull down high yield stocks.
**Telcos**
Singapore Telecommunications, also commonly known as Singtel, being the largest telecommunications company in Singapore is also a great dividend yielding stock. There is intense competition among the telco space in Singapore with Singapore regulator announcing the potential entry of a fourth telco operator. Headwinds have plagued the industry in general. One saving grace would be Singtel has managed to secure the 700MHz spectrum band which could be beneficial to its bottom line since analyst has projected huge capex savings from its winning bid for the spectrum. Netlink Trust IPO which was completed recently during the year could boost potential one-time special dividend payout. It is currently offering a decent 4.76% dividend yield. A close competitor to Singtel, Starhub price performance has been lackluster during the year. Investors may accumulate its shares as it is currently offering a pretty high dividend yield of 6.8% per annum. M1 had suffered the similar fate from lackluster mobile growth and is currently priced at 6.2% annual dividend yield. The sustainability of the dividends is very much dependent on future free cash flows available for distribution and investors should not rush straight into buying the stock due to its current dividend yields from historical earnings and cash reserves.
**SGX**
Singapore Exchange Limited, the sole stock exchange operator in Singapore is a listed entity itself. Its full front focus in developing its derivatives trading business and diversifying away from pure stock trading has started to pay dividends which contributed strongly to its bottom line. 3-year CAGR earnings growth stood at 3%, partly fueled by the increasing trading volume for its China-based futures derivatives products. Singapore Exchange is essentially a monopoly and solid proxy to the vibrant Singapore financial hub. Earnings are expected to be stable, barring extreme investors and fund withdrawals. Singapore government’s push towards enhancing Singapore’s global wealth management status will trickle down and benefit Singapore Exchange as a key player. The dividend yield of SGX stood at 3.67%, and investors could consider allocating a proportion of investable funds into the growing monopoly.
**Wilmar**
Commodity price plunge as a result of China slowdown in late 2015 has put Wilmar International in a difficult financial position. However, Wilmar has weathered the storm well, posting a net profit of USD60 million as compared to a net loss of USD220 million in the preceding year. The Board has decided to raise the dividend rate as well for the commendable first half performance. The dividend yield is at a low end of 2% per annum but a recovery in earnings may see the Board rewarding investors with higher dividends as a result from stronger cash flows from its core palm oil cultivation business.
**ThaiBev**
Thai Beverage Public Co., Ltd., the maker of Thailand’s top beer beverage Chang beer brand portfolio, has been a solid dividend paying stock for years. Despite being the fourth largest producer in terms of global sales volume, its share price is valued at a significant discount to global peers. Its P/E is currently at around 16 times historical earnings and is considered low by taking into account the stable earnings base from its alcoholic beverage segment. Beverage companies are well known for their solid dividend yield and ability to maintain its payout even at recessionary economic conditions. It is currently offering a sweet dividend yield of approximately 3.55% which should provide investors a steady stream of dividend income for the coming years.
