For those who may have just started working in the last four or five years and have managed to save up some cash from salary increments and bonuses, you may be wondering what to do with it. Rather than letting it languish in a bank account earning close to nothing, or placing it in a fixed deposit yielding barely more than 1%, you could choose to park that cash in shares of solid, well-run companies.
Armed with just S$30,000, I would place this amount in three excellent companies that I know I can count on over the long term. These companies offer a good mixture of dividends plus growth, which will supplement one’s income and also provide long-term capital appreciation.
Our FREE SGX stock pick!
1. Raffles Medical Group
Raffles Medical Group Ltd (SGX: BSL) is an operator of hospitals and clinic chains in Singapore and the Asia-Pacific region. RMG owns a hospital in Singapore (Raffles Hospital), an adjoining specialist centre, and a chain of clinics. Over in China, the group has just completed and started operating its new hospital in Chongqing, while another hospital is under construction in Pudong, Shanghai.
RMG offers good long-term growth as CEO Dr Loo has committed to expanding the Raffles brand in China. Once the gestation period for both new hospitals is over and the group assesses how each hospital has performed, there are plans to construct and open even more hospitals in China over the next 10 years. Investors can gain access to a resilient industry (healthcare) managed by a prudent team with prospects for steady growth. RMG currently pays a dividend yield of around 2.4% twice yearly.
2. iFast Corporation Limited
iFast Corporation Limited (SGX: AIY) is a financial technology (fintech) company that owns a platform for the distribution of financial products such as equities, fixed income, and unit trusts. iFast acts as a middleman between product providers (which create the products) and their clients (which select the product from iFast’s platform), and the group earns fees from the assets under administration (AUA) it manages.
iFast has set an ambitious growth target for its AUA to hit S$100 billion by the year 2028. The current group AUA is just S$8.75 billion as of 31 March 2019. While this may seem like a lofty target, note that management has mentioned that there is a lot of untapped potential in Asia for wealth management, which should drive iFast’s long-term AUA growth. iFast is also paying a quarterly dividend, and the historical dividend yield is around 2.8%.
3. Boustead Singapore Limited
Boustead Singapore Limited (SGX: F9D) is an engineering conglomerate with four main divisions: energy-related engineering, real estate solutions, geospatial technology, and healthcare technology.
The group recently reported a record order book level of S$763 million as of 31 March 2019, contributed by the record order book under its real estate unit Boustead Projects Limited (SGX: AVM) of S$660 million. Growth will come from the real estate division’s push to incorporate new technologies and capabilities so it can bid for a wider range and higher-value projects. Healthcare technology, which was acquired in June last year, is also slated to grow steadily, with management coming up with initiatives to drive growth. The group pays a twice-yearly dividend and has a historical dividend yield of 3.8%.
How to size your positions
A natural assumption would be to allocate the S$30,000 equally to all three positions, which would mean S$10,000 per position. However, investors who lean more towards growth could allocate a higher proportion to RMG and iFast as these two companies are more growth-oriented and pay lower dividend yields. One possible allocation strategy would be for S$12,500 each in RMG and iFast and the remaining S$5,000 in BSL.
However, if an investor wishes to focus more on dividends, he should shift more of his funds to BSL as its dividend yield is higher than those of the other two companies. A possible allocation strategy could be S$5,000 each to RMG and iFast, and S$20,000 to BSL.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore recommends shares of Raffles Medical Group Ltd, iFast Corporation Limited, and Boustead Singapore Limited. Motley Fool Singapore contributor Royston Yang owns shares in Raffles Medical Group Ltd, iFast Corporation Limited, and Boustead Singapore Limited.