Entering the world of investing can be quite daunting, especially if you lack general knowledge in the field of finance. So before you commit your capital into different types of investments, be sure to equip yourself with adequate knowledge on the basics of investing like stocks, bonds, and mutual funds.
To assist you on that journey, here is a look at the best Singapore dividend stocks in 2021.
What Are Dividend Stocks?
So what are dividend stocks? Why are they important? Essentially, a dividend stock is a payment made by companies to shareholders through a fair portion of earnings or dividends regularly.
Unlike the regular payment of cash, these payments are made in shares. However, shareholders can still obtain dividends in the form of cash, additional stock shares, or also other different types of property.
Furthermore, companies are also at an advantage as they can reward the shareholders with dividend stocks without reducing their cash balance. But do keep in mind that the business of a company must be able to generate more profit than the amount needed to run the company to ensure the dividend stocks of a company are successful.
How to Select the Best Dividend Stocks in Singapore
Now, the question that comes next is, how to select the best dividend stocks? Well, here are 2 simple guidelines to help you make an excellent buying decision:
1. Look for dividend safety
Dividend safety is imperative if you want to ensure that the payment of the dividend will be made consistently at the same or higher rate. What you can do to assess the dividend safety for the variety of stocks is by comparing the earnings of a corporation to the dividend payments.
You can also determine the dividend safety by analyzing the risk that the industry might face. This is because your dividend payment might still be less safe even with a low dividend payout ratio if the industry that the company is involved in is unstable.
2. Opt for a good strategy
When you’re planning to partake in investing, choose the best strategy and make sure to stick to it! There are different types of strategies like the high dividend yield approach or the high dividend growth rate strategy. Choose a strategy that is aligned with your goal as a dividend investor.
As such, a high dividend yield approach is focused on slow-growing companies with only sufficient cash flow. It’s important for you to also consider the risks that both approaches might have before selecting one over the other.
Top 10 Best Singapore Dividend Stocks 2021
As we have indulged in how to carefully select the best dividend stock, you might want to know more about the best dividend stocks to choose from in Singapore. Worry not! Although there are a plethora of choices, we have made a comprehensive list based on the stocks that had shown an impressive record of retaining or increasing dividends in the last 10 years. Hence, this is a list of the Top 10 Best Singapore Dividend Stocks in 2021!
1. DBS Group Holdings Limited(SGX: D05)
Dividend Growth Rate (CAGR 10 years) = 8.2%
Excluding special dividends: $0.5(2017)
Listed on the Singapore stock exchange on Nov 29, 1968, DBS, incorporated in Singapore, is a leading financial services group focusing on Greater China, South East Asia, and South Asia. The group’s business covers four parts: consumer banking/wealth management, institutional banking, treasury markets, and Islamic banking services.
Moody’s and Standard & Poor’s have rated DBS as Aa1 and AA-. Euromoney ranks DBS as the “World’s Best Bank” and “World’s Best Digital Bank.” DBS was named the “safest bank in Asia” by Global Finance from 2009-2020.
DBS has been recording strong growth except for 2020(the COVID-19). The group is confident the group will continue the growth post-pandemic. The stock price has recorded double growth over the past five years. The market cap is S$77 billion.
The dividend yield is 4.38%. The moderately low P/E is 12.93. It can be a favorite choice among long-term investors, preferring stable and regular income streams.
2. Overseas-Chinese Banking Corporation Limited(OCBC)(SGX: 039)
Dividend Growth Rate (CAGR 10 years) = 5.9%
Incorporated in Singapore and listed on the Singapore stock exchange, OCBC has five business segments: global consumer/private banking, global wholesale banking, global treasury and markets, insurance, and other investing holdings activities.
The business covers Southeast Asia, Greater China, and other markets in the Asia Pacific. The financial rating is AA- and Aa1 from Standard & Poor’s and Moody’s. It is also the second-largest bank in South East Asia by assets after DBS.
The Global Finance Magazine names OCBC one of the top five safest banks in the world. It is also the strongest bank designated by the Asian Banker for 2018-2019.
The bank has seen the continuous growth of its businesses over the past(except for the COVID-19). The bank continues to expand in the focus areas and is confident of its strategies for the future.
OCBC’s stock price has seen more than 37% growth over the past five years. The market cap is S$51.7 billion, and the dividend yield is 3.56%. The stock trades with a P/E ratio is 10.60. The moderately low price can be a preferred choice for mid-to-long term income investors.
3. Micro-Mechanics (SGX:5DD)
Dividend Growth Rate (CAGR 10 years) = 12.8%
Excluding special dividends: $0.02 (2015), $0.01 (2016, 2017, 2018, 2019)
Primarily, Micro-Mechanics (Holdings) Ltd. is a public corporation that focuses on the designs, manufactures, and markets the tools and parts in process-critical applications for high technology industries like the aerospace and medical industries.
The products that it manufactures are wire cutter blades, rubber tips, and also large wire equipment. Starting as a small factory in Singapore, Micro-Mechanics now has a worldwide customer base from five manufacturing facilities in Singapore, Malaysia, China, the Philippines and the USA.
4. CapitaLand (SGX:C31)
Dividend Growth Rate (CAGR 10 years) = 7.2%
Excluding special dividends: $0.02 (2011)
Evidently, CapitaLand Ltd. can be considered as one of Asia’s largest real estate companies, with its headquarter located in Singapore. It has a global portfolio which consists of integrated developments, shopping malls, offices, homes, lodging, real estate investment trusts and funds.
As an investment holding company, it seeks to engage in matters relating to the consultancy services while operating through business segments like CapitaLand Singapore, Malaysia and Indonesia (CL SMI), CapitaLand China (CL China), CapitaLand Vietnam (CL Vietnam) and CapitaLand International (CL International).
5. Powermatic Data Systems (SGX:BCY)
Dividend Growth Rate (CAGR 10 years) = 17.5%
Excluding special dividends: $0.02 (2017, 2018), $0.03 (2019)
Powermatic Data Systems Ltd., an investment holding company, specializes in the design and manufacturing of wireless connectivity devices and also provision of wireless solutions. It operates through the Wireless Connectivity Products segment which comprises manufacturing, marketing, and also the distribution of wireless connectivity products.
For instance, the example of the advanced devices produced by Powermatic Data System is high-performance wireless radio modules, indoor and outdoor access points, and wireless antennas. These products are used in diversified industries like Healthcare, Factory Automation, Hospitality, and Security Surveillance.
6. Haw Par (SGX:H02)
Dividend Growth Rate (CAGR 10 years) = 4.1%
Excluding special dividends: $0.15 (2015), $0.85 (2018)
Haw Par Corp. Ltd. is a holding company which is focused on healthcare, leisure products, property and investment. Primarily, it licenses Tiger trademarks and also owns investments for long-term holding purposes. Their most famous products include the Tiger Balm and also Kwan Loong brands operated under the Healthcare segment.
On the other hand, the Property segment takes part in owning and leasing out investment properties in Asia while the Investment segment focuses on investing activities like the quoted and unquoted securities in the Asia region.
7. Hotel Properties Limited (SGX:H15)
Dividend Growth Rate (CAGR 10 years) = 7.2%
Excluding special dividends: $0.03 (2010, 2011), $0.035 (2012), $0.04 (2013, 2015, 2016), $0.06 (2014, 2017, 2018, 2019)
Operating as an investment holding company, Hotel Properties Ltd. mainly engages in hotel ownership, management and operation, and property development. The business segments that it operates in are on Hotels, Properties and Others.
The Hotels segment involves hotel operations, shopping galleries, and also hotel management services’ provision. The Properties segment is focused on offering rental and sale operations of their residential properties and commercial units. Lastly, the Other segment includes other areas like the distribution and retail operations.
8. OCBC (SGX:O39)
Dividend Growth Rate (CAGR 10 years) = 5.9%
Oversea-Chinese Banking Corp. Ltd. or more commonly known as OCBC Bank is a multinational banking and financial services corporation. This corporation is primarily focused on the provision of financial and banking services.
It operates in a variety of business segments like Global Consumer or Private Banking, Global Corporate or Investment Banking, Global Treasury and Markets, Insurance, OCBC Wing Hang, and Others. To note, the Global Corporate or Investment Banking segment is concerned with project financing, overdrafts, deposit accounts, advisory services, trade financing, syndicated loans, and also cash management.
9. UOB (SGX:U11)
Dividend Growth Rate (CAGR 10 years) = 6.2%
Excluding special dividends: $0.10 (2010, 2012), $0.05 (2013, 2014), $0.20 (2015, 2017, 2018, 2019)
United Overseas Bank Ltd. or UOB is a multinational banking organization with branches located in Southeast Asian countries. The main area that it engages in is the provision of financial services. The business segments that it is involved in are Group Retail (GR), Group Wholesale Banking (GWB), Global Markets (GM), and Others. Do note that the GM segment administers matters regarding the bank’s liquidity, investments, and market-making financial instruments while the Others segment manages non-banking activities and corporate functions.
10. SGX (SGX:S68)
Dividend Growth Rate (CAGR 10 years) = 1.1%
Excluding special dividends: $0.27 (2012), $0.05 (2013, 2014, 2015), $0.10 (2017)
Singapore Exchange Ltd. is an investment holding company that offers a variety of services related to securities and derivatives trading. As a member of the World Federation of Exchanges and the Asian and Oceanian Stock Exchanges Federation, this company operates in business segments such as Equities and Fixed Income, Derivatives, Market Data and Connectivity, and Corporate.
The main engagements of SGX are in treasury management, the corporation’s management and administrative services provision, provision of contract processing and technology connectivity services.
Other Things You Should Know
1. What are the types of dividends?
Dividends can be either interim or final. It is important to know about these differences because they each have their own set of advantages which means that one might work better for your situation than the other.
Interim dividend payments are usually smaller amounts paid out periodically by companies who do not make a profit every year; meanwhile, Final dividends pay off all debt after an initial investment has been made on behalf of shareholders- meaning Singapore investors get more money back from investing in those particular shares/stocks during periods where profits were had throughout the
2. Is Singtel a good dividend stock?
In the past 8 years, Singtel’s revenues have been stagnant and dropped slightly around $16-17 billion that period. Net profit has been steadily increasing from 2016 to 2018 but took a dive afterward.
Net profit, however, took an enormous dip after that from 2016 to 2018 due to two major transactions: “the disposal of Netlink Trust at $2.03 billion” and Bharti Airtel Fineat “$1.80billion.” However, without these events, SingTel’s net profits have remained pretty constant. If anything, it proves how steady Singtel’s earnings are in spite of having faced upsides or downsides.
3. Can you pay dividends?
Yes, but only if the company is making a profit. Otherwise, board members may face legal consequences.
4. Is dividend income taxable in Singapore?
When it comes to Singapore dividend tax, there are two types of dividends: non-taxable and taxable.
The following dividends are not taxable:
- Dividends paid on or after 1 Jan 2008 by a Singapore resident company under the one-tier corporate tax system except co-operatives
- Foreign dividends received in Singapore on or after 1 Jan 2004 by resident individuals. If an individual resident in Singapore receives foreign-sourced dividends through a partnership in Singapore, these dividends may be exempt from Singapore tax if certain conditions are met. For details, please refer to Tax Exemption for Foreign-Sourced Income
- Income distribution from Real Estate Investment Trusts (REITs), except distributions derived by individuals through a partnership in Singapore, or from the carrying on of a trade, business or profession in REITs.
The following dividends are subject to income tax:
- Dividends paid by co-operatives
- Foreign-sourced dividends derived by individuals through a partnership in Singapore. (Note: Such dividends may qualify for tax exemption if certain conditions are met. For more details, please refer to Tax Exemption for Foreign-Sourced Income)
- Income distribution from Real Estate Investment Trusts (REITs) derived by individuals through a partnership in Singapore, or from the carrying on of a trade, business or profession in REITs.
5. How to Report Dividends in Your Tax Return?
According to IRAS, You do not need to declare taxable dividends in your income tax return if the organization (s) indicates on the dividend voucher that they will provide the dividend information to IRAS. Otherwise, you need to declare all taxable dividends in your income tax return under ‘Other Income’.
6. What is the limit of dividends to be paid?
There’s no specific law on what a company can or cannot pay out as dividends, it all comes down to how much profit they have made. However, if you declare and pay dividends without having any profits at the time then you may risk criminal charges being filed against your directors for misappropriation of funds.
All in all, everything has its pros and cons. So always be sure to make the right decision especially when it comes to investments. We believe that investing in dividend stocks can be very rewarding.
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