Saving for our children’s university education can be a huge financial commitment. A four-year undergraduate program in Singapore’s public universities costs an average of S$40,000 for local students. The figure, which excludes other miscellaneous fees, is around a third more than a decade ago. With inflation, the fees will only increase in the coming years.
Although there are a myriad of options to save up for your child’s tertiary education, investing in shares might be the best of them all. With a time horizon of some 20 years before a newborn hits university-age, putting money in the stock market for the very long-term becomes almost risk-free.
With that, here are three shares that you can consider investing in to pay for your precious one’s university education.
DBS Group Holdings Ltd (SGX: D05) is the largest bank in Singapore. It is also one of the world’s most recognised banks, with more than 280 branches across 18 markets. The bank has won many accolades, including being recognised as the safest bank in Asia. To know more about DBS’s business, you can head here.
Being the largest bank in Singapore, DBS attracts many savers with its vast network. This pool of savers are also sticky; once someone opens a bank account and deposits money in it, he/she will likely not move funds in and out frequently, unless there is a compelling reason to do so. DBS has also managed to grow its net asset value and dividends consistently in the past. Given its strong track record, it should do the same going forward.
DBS’s share price closed yesterday’s trading session at S$23.46. At that share price, DBS has a price-to-book ratio of 1.3 and a whopping dividend yield of 5.1%.
Singapore Exchange Limited (SGX: S68), or SGX in short, is the only stock market operator in Singapore and is the next company you can consider as an investment to pay for your kid’s education.
Being the only bourse operator, it would be almost impossible for anyone to try to upend SGX’s position, in my opinion. This characteristic gives the company its durable competitive advantage. SGX also possesses an enviable net profit margin and return on equity (ROE); in its financial year ended 30 June 2018, it clocked in a net profit margin of 42.4% and an ROE of 34.1%. Both the figures are higher than what most companies in Singapore’s stock market achieve.
SGX’s share price closed at S$6.84 yesterday, giving the company a price-to-earnings (PE) ratio of 20 and a dividend yield of 4.8%.
Private healthcare services provider, Raffles Medical Group Ltd (SGX: BSL), is the third company. Raffles Medical is one of the largest providers of healthcare services in the region with operations in 12 cities across Singapore, China, Japan, Vietnam, and Cambodia. The healthcare outfit is also a well-known and trusted brand with many experienced medical professionals under its headcount.
The company is very likely to be around many years from now due to its strong profitability, healthy balance sheet, and solid ability to generate cash flow from its business. Being a healthcare provider, the company’s services are essential for the public, even during an economic crisis.
Raffles Medical recently opened the extension to its flagship Raffles Hospital in Singapore, and is on track to open two new hospitals in China later this year, and in 2019. If these new investments bear fruit for the long-term, Raffles Medical could go on to generate even more profit and free cash flow.
Yesterday, Raffles Medical’s share price closed at S$1.05, giving the company a PE ratio of 27 and a dividend yield of 2.1%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of DBS Group Holdings Ltd, Singapore Exchange Limited and Raffles Medical Group Ltd. Motley Fool Singapore contributor Sudhan P owns shares in Singapore Exchange Limited and Raffles Medical Group Ltd.