The Central Provident Fund (CPF) is Singapore’s social security system that allows working citizens and permanent residents to set aside funds for retirement, among other things. The monthly CPF contributions that both employers and employees make go into three buckets: Ordinary Account (OA), Special Account (SA), and MediSave Account (MA).
Currently, the OA gives you an interest rate of up to 3.5% per annum. Those of us who have more than S$20,000 in our OAs can invest the remaining in a scheme called the CPF Investment Scheme (CPFIS). The CPFIS allows you to invest in instruments such as shares, exchange-traded funds, and bonds to enhance your retirement nest egg. Here, let’s look at three Straits Times Index (SGX: ^STI) shares (also known as blue-chips) that have dividend yields higher than the CPF OA’s interest rate. Investors can consider investing in these if they wish to beat the CPF OA’s returns.
CapitaLand Mall Trust (SGX: C38U), the first company on the list, is a real estate investment trust (REIT) that owns 15 shopping centres in Singapore. Those malls include Tampines Mall, Junction 8, and Plaza Singapura. CapitaLand Mall Trust also holds a significant stake in CapitaLand Retail China Trust (SGX: AU8U), the first China shopping mall REIT in Singapore. CapitaLand Limited (SGX: C31), which is part of the Straits Times Index as well, is the sponsor of both REITs.
From 2013 to 2018, CapitaLand Mall Trust’s distribution per unit (DPU) climbed from 10.27 Singapore cents to 11.50 Singapore cents. The increase translates to an annualised distribution growth of 2.3%. Going forward, the DPU could grow further with a full-year contribution from the acquisition of Westgate at the end of 2018 and the opening of Funan in the later part of 2019.
At CapitaLand Mall Trust’s current unit price of S$2.40, it has a price-to-book (PB) ratio of 1.2 and a distribution yield of 4.8%.
The next company on the list is DBS Group Holdings Ltd (SGX: D05). DBS is one of the world’s most recognised banks, clinching numerous awards such as the “World’s Best Digital Bank,” “Asia’s Best Bank,” and “Safest Bank in Asia.”
DBS shareholders have been rewarded with higher dividends over the years. From 2014 to 2018, the dividend per share has grown 19.9% per year from S$0.58 to S$1.20. DBS reiterated in its 2019 first-quarter earnings that its “policy of paying sustainable dividends that rise progressively with earnings remains unchanged.” What’s more, DBS recently announced that it would start paying shareholders quarterly dividends in order to provide them with a more regular income stream.
At DBS’s current share price of S$25.82, it has a PB ratio of 1.4 and a dividend yield of 4.6%.
Singapore Exchange Limited (SGX: S68) is the sole stock market operator in our country. On top of providing equity listings, it also has a strong derivatives business. This business prides itself on being Asia’s most liquid international market for pan-Asian listed derivatives, providing exposure to 90% of the region’s gross domestic product (GDP).
SGX’s dividend climbed from S$0.28 per share in the fiscal year ended 30 June 2014 (FY2014) to S$0.30 per share in FY2018. The increase gives it a growth rate of 1.7% per annum.
Source: Singapore Exchange FY2018 earnings presentation
In the first quarter of FY2019, SGX started a new dividend policy of paying a dividend of S$0.075 per share every quarter, translating to a total annual dividend of S$0.30 per share. SGX said that it aims to “pay a sustainable and growing dividend over time, consistent with the company’s long-term growth prospects.”
Currently, SGX shares are selling at S$7.45, giving it a price-to-earnings ratio of 22 and a dividend yield of 4%.
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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 recommendations on CapitaLand Mall Trust, DBS, and Singapore Exchange. Motley Fool Singapore contributor Sudhan P owns shares in CapitaLand Mall Trust and Singapore Exchange.