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2 Singapore Dividend Stocks I Plan to Hold for the Long Term

Building a portfolio of high-yield dividend stocks and reinvesting the dividends can be a great way to build wealth. Singapore, in particular, is a great hunting ground for income stocks as dividends are not taxed and there are quite a few companies here that have a long track record of paying a dividend each year.

In this article, I reveal two such stocks that have been in my portfolio for more than three years.

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One of my favourites

Singapore’s largest bank, DBS Group Holdings Ltd (SGX: D05), is one of my favourite dividend stocks. Back in 2016, DBS shares plunged to around S$13.50 per share, which was around the time I picked up my first shares in DBS. At that time, investors were concerned about the bank’s exposure to the oil and gas industry which was facing multiple defaults due to the low oil price.

DBS had to write off some bad debts at that time but has since rebounded strongly. Its shares now trade at around S$26 apiece and DBS has committed to paying out S$1.20 in dividends each year.

That translates to a juicy yield of around 4.6%. But that’s not all. DBS can easily sustain or grow its dividend in the future. Based on its 2019 first-quarter results, the bank has a conservative payout ratio of 46.5% and has a rock-solid balance sheet with capital adequacy ratios well above regulatory requirements.

It also has a track record of growing its earnings: from 2006 to 2018, DBS’s earnings per share increased from S$1.28 to S$2.01. All of which makes DBS one of my most high-conviction income stocks to own.

“Watching” the dividends roll in

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

In the year ended 31 March 2019, the group’s revenue increased 4%, while net profit after tax surged 41%. It has also increased its net assets per share from S$0.58 in 2015 to S$0.79 in 2019, whilst paying out a dividend each year.

In the most recent financial year, Hour Glass increased its dividend to 3.0 Singapore cents per share up from 2.0 Singapore cents last year. More importantly, Hour Glass has the ability to increase its dividend in the future. Its current dividend payout ratio is 30.3%, which gives it plenty of room to increase it if management sees fit. 

On top of that, Hour Glass has a net cash position of S$166 million. With little need for the money, management may decide to redistribute a portion of that to shareholders in the future.

While its stock has risen around 14% since the time I bought some four years ago, the group still sports an attractive dividend yield of 3.6%. Considering its strong financial position and capacity to pay out higher dividends in the future, current prices could still represent great value for income investors.

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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 DBS Group Holdings Ltd and Hour Glass Ltd. The Motley Fool Singapore has recommended shares of DBS Group Holdings Ltd.