Everyone longs for a comfortable and secure retirement but the key is whether you can afford the same level of lifestyle you were used to when employed. This is where investments and stocks come in, as they can provide us with long-term capital growth in excess of inflation as well as a steady stream of passive income.
When it comes to building up a retirement portfolio, investors should seek companies with a consistent, predictable and fair high dividend yield (for regular cash inflows), strong asset base (for security), good reputation and track record, as well as a steady growth runaway for the future.
The last point was brought up because many retirees tend to live longer than expected with advances in medical technology, and companies that offer an element of long-term steady growth ensures the portfolio also grows in tandem.
Here are four companies which deserve a place in your retirement portfolio.
1. Haw Par Corporation Ltd
Haw Par Corporation Ltd (SGX: H02) is a conglomerate which has four key divisions – healthcare, leisure, properties and investments. The healthcare division is the main driver of growth for the group as it is represented by the Tiger Balm brand, which is internationally well-known. Tiger Balm is seeing long-term potential steady growth from the introduction of new products and expansion into other regions of the world.
Haw Par has a strong asset base in its investments division as it owns significant stakes in both United Overseas Bank Ltd (SGX: U11) and UOL Group Limited (SGX: U14). These stakes contribute to a regular stream of dividend income which bolsters Haw Par’s cash balance and enables it to pay out a good dividend itself. Haw Par paid out a total annual dividend of 30 Singapore cents per share (excluding the one-off 85 Singapore cents), and its trailing dividend yield stands at 2.1%.
2. DBS Group Holdings Ltd
DBS Group Holdings Ltd (SGX: D05) is one of the three largest banks in Singapore and offers a comprehensive suite of banking services for both individuals and corporations. The bank is considered a stalwart even among blue-chip companies and represents the “pillar” of Singapore’s economy. A stake in Singapore’s premier bank would offer investors peace of mind along with steady growth.
The bank also recently declared a change in its dividend policy to a quarterly payment instead of half-yearly. The annual dividend is S$1.20 and the stock offers a 4.7% dividend yield.
3. Valuetronics Holdings Limited
For good exposure to the electronics sector, investors should consider Valuetronics Holdings Limited (SGX: BN2). Valuetronics is an electronics components manufacturer for both original equipment manufacturers (OEM) and original design manufacturers (ODM) and serves the automotive and consumer electronics industries. Owning a stake in Valuetronics also exposes the investor to the long-term prospects for the Internet of Things (IoT) and also artificial intelligence.
Valuetronics has a clean balance sheet with no debt, generates strong free cash flow on a consistent basis and also pays a twice-yearly dividend. The trailing dividend yield is around 6.4% for a total dividend payment of 25 HK cents per share.
4. Parkway Life REIT
Investors who want exposure to the healthcare sector should look no further than Parkway Life REIT (SGX: C2PU). Parkway Life REIT is one of Asia’s largest healthcare REITs by asset size and owns a portfolio of 50 properties as of 31 March 2019, spread across Singapore, Japan, and Malaysia.
Healthcare is a resilient sector which is relatively immune to economic downturns, therefore this REIT’s distribution per unit (DPU) should remain unaffected even if there is a severe recession. Parkway Life REIT also has an enviable track record of increases in DPU since its listing in 2007. The REIT offers an annualised dividend of 13.12 Singapore cents and a dividend yield of 4.3%.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommended shares of Haw Par Corporation Ltd, United Overseas Bank Ltd, DBS Group Holdings Ltd and Parkway Life REIT. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.