Retirement may seem an alien concept for many salaried employees as they face continuous rises in the cost of living. However, I assure you this is not a pipe dream, and it can be achieved if you are disciplined, methodical, and also choose the right investments. Most retirees prefer to have peace of mind plus a steady income for their golden years. This means the stability of the underlying business plays an important role, as does its cash-generation ability.
My previous article talked about the stability aspect, so this article will focus a little more on the income aspect, while also not neglecting stability as a secondary factor.
Here are two industries that both have decent growth prospects and good dividend yields to boot.
Industry: Real estate investment trusts
Real estate investment trusts, or REITs for short, are groups of real estate (i.e., physical properties) bundled together in a tax-efficient structure and then listed on a stock exchange. Singapore’s very first REIT, Capitaland Mall Trust, was listed in 2002. Since then, there have been numerous REIT listings in the last 17 years, such that the Singapore Exchange is now a well-known location for fostering the listing and growth of REITs.
The REIT sector is stable and resilient as the asset value is backed by physical property as a buffer in case anything goes wrong. The distributions REITs pay out (of which most are quarterly or half-yearly) are also backed by rental income secured on medium- to long-term leases, which increases visibility and provides assurance of recurring revenue.
REITs with a strong sponsor are also able to exhibit growth through asset injections from the sponsor, which can allow them to grow their asset base and distribution per unit over time. A good example of this would be Frasers Centrepoint Trust (SGX: J69U), which recently announced an asset injection (Waterway Point) from its sponsor Frasers Property Limited.
Tourism forms a major portion of Singapore’s economy, as we are an island-state that does not have natural resources or abundant land. The government has announced initiatives and measures over the last two decades to make tourism a key pillar of Singapore’s growth. Some of the recent planned initiatives include the completion of JEWEL at Changi Airport, a massive complex with retail and dining outlets, as well as the upcoming Bicentennial Event, which celebrates the 200th anniversary of Singapore’s founding in 1819.
As an industry, tourism is poised to show steady and sustained growth. The government has laid out plans to build a new Terminal 5 at the airport in anticipation of significantly higher tourist numbers. Construction will commence in 2020, and completion is expected in 2030.
Companies that latch on to the growth of tourism and air travel will benefit over a multiyear period, as the tailwinds from this industry will ensure visitor numbers can grow, barring unforeseen economic circumstances. A good example of such a company would be Straco Corporation Limited (SGX: S85), which owns two aquarium assets in China as well as 90% of the Singapore Flyer in Singapore.
Having the best of both worlds
Investors can thus enjoy the best of both worlds with these two industries — the growth opportunities present for REITs and tourism, as well as the dividends the underlying companies declare. As business prospects improve, dividends may also increase in tandem, thus providing retirees with both growth in share price as well as an increase in passive income.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Royston Yang owns shares in Straco Corporation Limited. The Motley Fool Singapore has recommended shares of Capitaland Mall Trust, Straco Corporation Limited, and Frasers Centrepoint Trust.