Five stocks with yields that beat Singapore government bonds
THE appeal of government bonds has increased as yields rise, but income-focused investors should consider tapping Singapore’s equity market for some safe dividend stocks that might also benefit in a rising interest rate and inflationary environment.
As economists and central bankers put out forecasts of a rough ride ahead for the global economy, equities that provide necessary goods and services, and possess strong balance sheets, are likely to be able to sustain dividend payouts to shareholders.
Here are 5 counters that could offer investors alternatives to bonds.
While the investment climate is uncertain and may impact banks’ wealth fee income, lenders are expected to generate much higher net interest income that could more than offset the dip in wealth fee income.
Banks are obvious beneficiaries of interest rate hikes. The local trio noted in results updates early this month that their net interest margins, a key gauge of their profitability, are likely to rise further with the United States and Singapore central banks’ rate hikes.
The fatter margins could prompt lenders to bump up their dividend yields, with a UOB Kay Hian analyst expecting OCBC and DBS to reward shareholders with yields of 5.1 per cent and 5.2 per cent, respectively, in 2023. Meanwhile, analysts at DBS Group Research have put their bets on UOB dishing out a dividend yield of 5.5 per cent.
Land transport heavyweight ComfortDelGro , with its net cash position of S$602.6 million and a promise to pay out any unneeded future divestment gains to shareholders, may also deserve a slot in an income investor’s portfolio, especially as it benefits from normalising mobility activities.
Lim Jit Poh, chairman of ComfortDelGro, said in the company’s financial results announcement a fortnight ago that the company does not have any problem funding dividend payouts internally. The mainboard-listed company has committed to a dividend payout ratio of at least 50 per cent, rewarding shareholders with an interim dividend of S$0.0285, representing a payout ratio of 70 per cent, for the first half of FY2022.
Because of the company’s healthy net cash position with stable forecasted cash flows, Lim said ComfortDelGro was also able to offer the full net gain of S$30.5 million, from the sale of a property in London, to shareholders in the form of a special dividend amounting to S$0.0141.
The Singapore company with overseas operations had earlier wanted to list its investments in Australia to unlock value for shareholders. On the back burner now, the flotation plan might be re-ignited when market conditions Down Under improve.
Singapore Technologies Engineering’s core earnings dipped for the first half of FY2022 and were below street estimates, weighed by transaction and integration expenses of its acquisition of TransCore and global shortages of semiconductors.
The mainboard-listed company has, however, historically been considered a safe haven stock and tends to do well in choppy markets because of its defensive nature.
Record orders on its book amounted to S$22.2 billion, S$4.6 billion of which are expected to be delivered in the second-half of FY2022, offering investors earnings visibility.
Also, now that it has changed its dividend policy to pay out dividends every quarter instead of twice a year, it has planned payouts of S$0.04 per share each quarter for FY2022 - translating to an expected dividend yield of 4.2 per cent as of Aug 23.
