My Foolish colleague, Peter Stephens, recently wrote that amid the market volatility, the best way to invest might be to buy “high-quality dividend stocks at regular intervals”.
So, what are some high-quality income stocks listed in Singapore to consider for your stock portfolio? Here are three of them that you can buy now through to 2020.
(Tip: All of the companies mentioned below have dividend yields higher than that of the SPDR STI ETF (SGX: ES3), which has a yield of 3.8%. The SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of the Straits Times Index (SGX: ^STI).)
No. 1: DBS Group Holdings Ltd
DBS Group Holdings Ltd (SGX: D05) is Singapore’s largest bank, with operations in many Asian countries. This year, it became the world’s first bank to hold simultaneously three global best bank awards. It clinched the “World’s Best Bank” award given by Euromoney in 2019. The prize came right after two other accolades it won in 2018 – “Global Bank of the Year” from The Banker and “Best Bank in the World” from Global Finance.
In the last couple of years, DBS’s dividend per share has climbed from S$0.58 in 2014 to S$1.20 in 2018, translating to a phenomenal growth of 107%. In its 2019 first-quarter, DBS reiterated that its policy of paying sustainable dividends that increase progressively with earnings remains the same. Therefore, as long as DBS is able to ride on Asia’s growth story, DBS shareholders can expect to receive higher dividends.
DBS has a share price of S$24.64 at the time of writing. At that price, it has a dividend yield of 4.9%.
No. 2: SATS Ltd
SATS Ltd (SGX: S58) is a provider of food solutions and gateway services solutions, mostly to the aviation industry.
The company has been growing its dividends steadily over the years – dividend per share grew 36% from S$0.14 in FY2014-15 to S$0.19 in FY2018-19.Source: SATS FY18-19 AGM presentation
SATS has the potential to grow further, giving rise to the possibility of higher dividends.
First, there’s the expansion of Singapore’s Changi Airport, which is expected to open Terminal 5 around 2030. Secondly, the rising middle class in Asia also provides strong tailwinds for its overall business. Thirdly, SATS will be pumping more money into investments over the next three years, taking advantage of the growth opportunities found in the region (see below).Source: SATS FY18-19 AGM presentation
At SATS’s share price of S$4.78 right now, it sports a dividend yield of 4%.
No. 3: Micro-Mechanics (Holdings) Ltd
Micro-Mechanics (Holdings) Ltd (SGX: 5DD) is involved in the designing, manufacturing, and marketing of consumables and precision tools that are used in the semiconductor industry.
Since its listing in 2003, Micro-Mechanics has dished out a total dividend of S$0.739 per share to its shareholders. This gives a return of almost 400% since its initial public offering (IPO), which doesn’t even account for capital gains. What an envious track record.Source: Micro-Mechanics (Holdings) Ltd FY2019 earnings presentation
Micro-Mechanics held its total dividend for FY2019 (fiscal year ended 30 June 2019) steady despite lower profitability. The company said that the constant dividend shows its confidence in both Micro-Mechanics’ and the semiconductor market’s long-term prospects. CEO Chris Borch explained in the company’s earnings release:
“Our philosophy is to stay focused on our long-term goals and not get overly distracted by short-term variations in the industry. We believe this is the correct approach for Micro-Mechanics to build sustainable growth and value for all stakeholders. Moving forward, we intend to continue automating our operations and building a flexible, capable and skilled work force.”
Over the long run, Micro-Mechanics is poised to take advantage of the increasing use of chips in our everyday lives. At Micro-Mechanics’ share price of S$1.59 at the time of writing, it sports a dividend yield of 5.7%, excluding the FY2019 special dividend. Including the special dividend, the yield swells to 6.3%.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of DBS Group Holdings Ltd, SATS Ltd and Micro-Mechanics (Holdings) Ltd. Motley Fool Singapore contributor Sudhan P owns shares in SATS Ltd and Micro-Mechanics (Holdings) Ltd.