Dividend Investing 101
If you want to build your wealth, buying stocks of companies that give you regular dividends is one of the wisest investment decisions you can make.
This is where dividend investing in Singapore comes into play.
Because of their low volatility, dividend stocks are an amazing option for investors who are looking for lower-risk investments, especially those nearing retirement or those who simply want to set up a passive income stream.
With the wide array of accessible and low-cost brokerages available today, you can try dividend investing without even leaving your home. In this guide, you’ll learn everything you need to know to start your dividend investing journey.
Here at OMY, you will discover the following:
- What Is Dividend Investing in Singapore?
- The Disadvantages of Dividend Investing in Singapore
- What Are Blue Chip Stocks in Singapore?
- How to Estimate Dividend Income
- Dividend Investing in Singapore: Best Dividend Stocks You Can Buy Today
- Dividend Investing Strategy for Long Term Outperformance
What Is Dividend Investing In Singapore?
Dividend stocks are companies that give part of their regular earnings to their shareholders. These companies are usually stable and mature and have already built a solid track record through the years.
Is Dividend Income Taxable In Singapore?
One of the biggest advantages of dividend investing in Singapore is that it does not impose any withholding tax on the dividends.
So, What Does This Mean For Investors?
Whether you are Singaporean or non-Singaporean, you don’t need to worry about dividend income tax in Singapore. The one-tier corporate tax system is practised in the country, which means that companies already pay their corporate income tax as an entity. This is why all dividends for investors are already tax-exempt. However, there are still exceptions. Find out more about it here.
There is also no tax when you invest in REIT as long as it distributes at least 90% of its taxable income as dividends annually.
Keep in mind that this is not the case if you want to invest in US stocks or ETFs. For cases like these, you will be charged a 30% withholding tax since you are a non-US tax resident.
How To Get Dividend Payout In Singapore
There are no set rules, and companies may set their own policies on dividend payout.
Most dividend growth stocks in Singapore pay shareholders four times per year on a quarterly basis. However, there are also companies that pay monthly, once a year, or twice a year.
When it comes to dividend investing in Singapore, the dividends can be paid as cash or shares of stock.
The Disadvantages Of Dividend Investing In Singapore
Just like all investment strategies, dividend investing is not foolproof. Keep in mind that dividends come from the profits of companies. So, if a company keeps rewarding its shareholders instead of investing in growth, it’s also sacrificing future capital gains. Companies may even halt shareholder payments during a crisis, which is also a point of concern among investors.
If you want to start dividend investing in Singapore while you’re still young, you need to choose companies well. If not, you may miss out on potentially lucrative opportunities for stocks with high growth.
What Are Blue Chip Stocks In Singapore?
When it comes to dividend investing in Singapore, many investors favour blue chip stocks because these companies already have a stable cash flow and a business strategy that maintains their advantages over their competitors. This allows them to further sustain huge profits over the years, which then results in regular dividends to shareholders.
Some examples of the best bluechip stocks in Singapore you can invest in include DBS, UOB, and OCBC (more examples below). These companies pay out between 3% to 5%, depending on the performance of their share price trading.
When it comes to dividend investing in Singapore, it is vital to remember that the more popular a stock is, the higher its price will be, and the lower its dividend yield in Singapore will be. Conversely, a stock that is not popular with investors will trade at a lower price and will have a higher dividend yield.
Despite this, it’s crucial to remember that higher yields do not always equal the best investments.
When it comes to dividend investing in Singapore, sustainability and long-term earnings are key. If a company’s share prices decrease because investors are not sure about its future earnings, it will create a ripple effect. This will result in a pseudo-high dividend yield.
How To Estimate Dividend Income
If you want to learn how to estimate dividend income, it’s quite easy.
First, find out how many shares of stock you have. Then, determine the dividends paid per share of the company stock. This is the number investors are awarded for each share they have. Finally, multiply it by the number of shares you own. This is how you will know your potential earnings.
Let’s look at an example.
Imagine you own 500 shares of stocks in Company A that paid S$0.95 per share in dividends last year. Using the method above, you will get S$475.
Keep in mind that a company’s payout rate may change over time.
Dividend Investing In Singapore: Best Dividend Stocks You Can Buy Today
If you’re looking for blue chip dividend stocks in Singapore, you’re on the right page. Here are some of the best Singapore dividend stocks to buy.
United Overseas Bank (SGX: U11)
UOB is one of Singapore’s biggest banks, and this lender has proved its stability by reporting a net profit of a staggering S$2 billion for its fiscal 2022’s first half, flat against one year ago.
Considering its performance in recent years, it does not come as a surprise that it’s one of Singapore blue chips with high dividends. This bank has an interim dividend of S$0.60 and gives its shares a great 12-month trailing dividend yield of 4.6%.
It’s a good idea to invest in UOB because the increasing interest rates of banks will further boost its net interest margin. UOB is also very strategic, especially when it comes to developing its reach in the ASEAN region.
Currently, UOB is positioning itself as the preferred bank for both businesses and consumers by 2035. UOB also acquired Citigroup’s consumer banking business which will help its franchise in Thailand, Indonesia, Vietnam, and Malaysia.
Singapore Technologies Engineering Ltd (SGX: S63)
If you want to invest in stocks in the technology and engineering space, this is a good option. This portfolio spans public security, aerospace, and smart cities.
For 1H2022, this group reported a performance of S$4.3 billion, with its revenue rising 17% year or year. The operating profits of this group also rose 8% per year. It has a 4.5% forward dividend yield.
Singapore Exchange Limited (SGX: S68)
If you are looking for dividend stocks to buy in Singapore, the Singapore Exchange Limited is worth considering.
This is the sole stock exchange operator in Singapore, and it takes advantage of a natural monopoly that will ensure its success for a long time. The Singapore Exchange Limited reported good figures for its fiscal 2022, with its revenue edging up 4% year on year to S$1.1 billion.
Its shares have a distribution yield of 3.4%, based on its history. The group is also expected to see more growth in the near future as it will tap into its over-the-counter foreign exchange platform to achieve more volume that will drive in group revenue.
Raffles Medical Group (SGX: BSL)
This company is an integrated healthcare provider that offers a wide array of healthcare services. Its network includes tertiary hospitals and more than 100 clinics.
In 1H2022, this group offered a healthy revenue of S$382.3 million. Raffles Medical Group has gotten approval to set up an in-vitro fertilisation and assisted reproduction therapy centre in China to serve over 40 million women. RMG shareholders expect to receive a 1.46% dividend yield.
DBS (SGX: D05)
Singapore’s largest bank recently announced that its net profit for the first half of 2022 was at S$3.6 billion. Its shares offer a forward dividend yield of 4.3%.
This company has shown its resilience throughout the years, even during the pandemic. Just like UOB, the bank is expected to benefit from the interest rate increases as the US Federal Reserve aims to bring down inflation.
DBS also recently acquired Citigroup’s Taiwan consumer division. Furthermore, DBS is set to launch new income streams thanks to its digital exchange.
Pacific Century (SGX: P15)
Pacific Century is an Asia-based private investment group that was established in 1993. Its interest encompasses Financial Services and Property, and Technology, Media & Telecommunications.
Through the years, it has demonstrated a good track record of successful investing, therefore creating a long-term sustainable network in Asia. The expected Pacific Century dividend yield is at 9.63%, which makes it a good choice for individuals who want to try dividend investing in Singapore.
VICOM Limited (SGX: WJP)
This is a successful and well-known company that provides inspection and technical testing services. VICOM Limited is a subsidiary of ComfortDelGro Corporation Limited which provides vehicular and non-vehicular inspection and testing services.
With a market share of around 75% in the vehicle inspection market, this company is positioned for more growth in the future. It also has a positive track record of generating cash flow, as well as maintaining its debt-free balance sheet. Its dividend yield is around 4.1%.
Wilmar International (SGX:F34)
Although Wilmar International is not a household name in Singapore, it ranks in Forbes Global 2,000 and Fortune 500. This is a huge accomplishment considering it only celebrated its 30th anniversary recently.
Shareholders of this company have been rewarded with increasing dividends and it is poised to become an even larger player in the coming years. Wilmar International paid its shareholders a dividend yield of 3.43% in 2021.
Dividend Investing Strategy For Long Term Outperformance
Due to inflation and increasing concerns of economic turmoil, many investors with long time horizons now want to follow a long-term investment strategy that gives them stable and regular payouts.
When it comes to the dividend investing strategy for long-term outperformance, it is important to look at the different sectors that still attract good yields even against a subpar economic backdrop. This includes:
- Packaged food
- Household products
Furthermore, another dividend stock strategy you should know is reinvestment. Most investors use their dividends to earn or buy more stocks. Although this technique sacrifices short-term dividend payout, it will be more favourable in the long run because you will own more shares.
A Word from OMY
Now that you know the basics of dividend investing in Singapore, you can finally start your journey to achieve financial freedom.
Keep in mind that when it comes to building your investment moat in Singapore, it is crucial to research well. This way, you can make more informed decisions that will potentially turn into a great passive income stream or give you a solid financial cushion in the years to come.
More From OMY: How To Invest In Singapore: A Beginner’s Guide