The Supplementary Retirement Scheme (SRS) was set up in 2001 to address the financial needs of a greying population, and it complements the Central Provident Fund (CPF) scheme to help people save more. While CPF is used more for housing and education and is a compulsory scheme, SRS is voluntary, and SRS members can contribute any amount they wish at their own discretion.
Like the CPF Investment Account, the funds parked in SRS can also be invested in various investment instruments, including equities. Contributions are capped at S$15,300 per year for Singaporeans and S$35,700 a year for foreigners. These contributions are also eligible for tax reliefs, thus reducing the amount of tax payable for the individual.
While SRS does have many benefits, one downside is that the base interest rate on the account is very low, at just 0.05% for most banks. Hence, it makes sense for contributors to make their money work harder for them by investing in strong businesses. Here are three business to consider for your SRS account.
1. United Overseas Bank Ltd
United Overseas Bank Ltd (SGX: U11) is one of the three big banks in Singapore and offers a comprehensive range of banking services to individuals and corporations. The bank has a global network of more than 500 offices in 19 countries and territories in Asia Pacific, Europe, and North America.
The bank has reported strong growth in earnings over the years, with H1 2019 earnings coming in at S$2.22 billion, up 8% year on year. The non-performing loans ratio remains low at 1.5%, and the bank pays a full-year dividend of S$1.20. This translates to a dividend yield of 4.7% at the last traded price of S$25.15.
2. iFast Corporation Limited
iFast Corporation Limited (SGX: AIY) is a financial technology (fintech) company that operates an online portal for the buying and selling of securities such as equities, fixed income, and unit trusts. The group operates in Singapore, Malaysia, Hong Kong, India, and China.
iFast earns revenue by charging fees on the number of assets under administration (AUA) it manages, and the group has a very scalable business model. The AUA as of 30 June 2019 was S$9.04 billion, and the group believes there is a large addressable market in Asia that will enable it to grow its AUA steadily over the years. iFast’s 10-year target for 2028’s AUA is S$100 billion across all of the territories in which it has a presence.
The group pays a quarterly dividend, and last year’s full-year dividend per share amounted to 3.15 Singapore cents. At the last traded price of S$1.01, iFast offers a trailing dividend yield of 3.1%.
3. Mapletree Industrial Trust
Mapletree Industrial Trust (SGX: ME8U) is a REIT investing in industrial real estate in Singapore and the United States. Its property portfolio consists of 87 industrial properties in Singapore and 14 data centres in the US. As of 30 June 2019, total assets under management stood at S$4.8 billion.
MIT has a long track record of delivering higher distribution per unit (DPU), as evidenced by the chart below.
Source: MIT Q1 2020 Presentation Slides
Q1 2020 saw a further rise of 3.3% year on year in DPU to 3.10 Singapore cents, and the REIT is not sitting still as it is embarking on its largest redevelopment project at Kolam Ayer with 24.4% of space already pre-committed. The REIT sports a high portfolio occupancy rate of 90.8%, and with aggregate leverage at 33.4%, there is still room for the REIT to acquire in order to grow its asset base (and DPU) further. At the last traded price of S$2.26, MIT’s trailing-12-month dividend yield stands at 5.4%.
Steady growth plus yield
The three companies above have stable operating characteristics, long track records, and prudent management teams. UOB is a stalwart and offers long-term growth that tracks the Singapore economy, while iFast is riding on the fintech trend to grow its AUA. MIT offers a steady and consistent yield while also offering potential future growth. These three businesses thus offer investors a good mix of both growth and yield and deserve a place in investors’ SRS accounts.
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