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2 Top Dividend Stocks to Buy in July

The Singapore stock market is home to a wide array of dividend stocks. Unlike most countries, investors in Singapore are not taxed on dividends, which makes income investing even more appealing.

With that said, here are two stocks local income investors will love.

Banking on dividends

United Overseas Bank Ltd (SGX: U11), more commonly referred to as UOB, is one of the most consistent dividend payers in the market. The bank has not made an annual loss since 1991, and it has grown its net tangible assets per share at 7.4% over the last 25 years. 

The fact that this period included the 2008 great financial crisis and the 1997 Asian financial crisis makes its track record all the more remarkable.

More importantly, banks in Singapore continue to ride on the tailwinds propelling the economy.

According to a survey by Z/Yen Group, Singapore is the third best financial centre in the world — behind only London and New York. With global uncertainty, more companies might see Singapore as an alternative financial hub. The ASEAN region’s economy is also expected to grow at between 5.4% to 6.4% per year up to 2030, which could make ASEAN an attractive destination for multinational corporations.

In the most recent reporting quarter ended 31 March, UOB reported an 8% growth in net profit.

Moreover, after the recent sell-off earlier this year due to investors concerns over geopolitical uncertainty and the Fed’s hawkish view on interest rates, UOB shares now trade at a reasonable valuation.

At its current price of S$26.05 per share, it sports a price-to-earnings ratio of 10.9, a price-to-book ratio of 1.18, and a dividend yield of 3.8% (excluding a special dividend paid out last year).

The bank’s dividend is also well-covered. Its dividend payout ratio in 2018 stood at just 42%, giving it plenty of headroom to increase its dividend if it sees fit.

Tick-tock…watch this stock

While many retailers have struggled since the emergence of e-commerce, luxury watch retailers have continued to thrive. Local watch retailer Hour Glass Ltd (SGX: AGS) in particular has done extremely well.

In its last financial year ended 31 March 2019, the group’s revenue increased 4%, while net profit after tax surged 41%. The group also continued to reduce its leverage, using a chunk of the profits to pay off debt. As such, it ended the year with a record net cash position of S$166 million.

Chairman Dr. Henry Tay noted that despite e-commerce becoming an increasingly important channel for luxury good sales, consumers still relied heavily on in-store experiences.

In a survey conducted by consulting firm McKinsey, it was reported that 90% of all respondents stated that they considered the in-store, in-person experience the most critical source of influence when making purchasing decisions.

Hour Glass Ltd, with its network of specialised luxury-watch retail shops, is well-positioned to continue serving the needs of the luxury watch consumers.

Its 2018-19 revenue growth is a testament to that fact. Hour Glass also has a remarkable track record of growing its net asset value per share. Between 2015 and 2019, Hour Glass’ net asset value per share grew from S$0.58 to S$0.79, with its growing cash position making up the bulk of that growth.

Moreover, despite a recent price surge, the watch retailer’s shares still trade at attractive valuations. At the stock’s current price of S$0.80, it sports an undemanding price-to-earnings ratio of 8.1, a price-to-book ratio of one, and an attractive dividend yield of 3.75%.

Most importantly, Hour Glass can easily increase its dividend in the future. Its FY18/19 dividend payout ratio stood at just 30.3%, and the group is also hoarding a large amount of cash that could be distributed back to shareholders in the future. 

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia owns shares in Hour Glass Ltd. The Motley Fool Singapore recommends shares of United Overseas Bank Ltd.