Singapore's 7 Best Dividend-Paying Stocks

The Singapore stock market offers numerous stocks that pay healthy dividends. As of March 31, 2021, the average annual dividend yield paid by Singapore-listed companies stood at 3.7%, which is quite substantial. In comparison, the FTSE 100 Index stocks in the UK had an average annual dividend yield of 2.83%.

Since Singapore-listed companies are required to provide dividend information in their financial reports, yield-return information for each company is readily available. The first internal cue to consider is also the track record of each company in paying dividends. A company ranking in the top ten this year does not guarantee its position next year. Reliability is crucial – watch out for companies that consistently return cash to investors.

1. CK Hutchison

This port operator is a paragon of long-term dividend-paying enterprises. It facilitates global trade and takes a cut from products flowing through its global network of 53 ports across 27 countries. CK Hutchison's stock price is unlikely to soar like tech stocks because potential new port sites are limited, restricting its growth potential. However, it holds a solid position in a mature market, posing high entry barriers for disruptors.

2. StarHub

StarHub, a telecommunications company, reduced its dividends in 2019 and 2020. However, over the past decade, it has been one of Singapore's best dividend-paying stocks, with annual returns exceeding 15%. This relatively smaller-scale telco has seen its stock price decline in recent years, making it an opportunity for long-term investors to buy low and wait for price rebounds.

3. Maple Tree North Asia Trust

Since 2013, Maple Tree North Asia Trust has fluctuated between SGD 0.63 and SGD 1.48 per share. This Singapore-based real estate investment trust (REIT) aims to provide long-term stable returns through commercial property investments in China and Japan.

4. ST Engineering

Singapore Technologies Engineering Ltd operates in the aerospace, electronics, and marine sectors. Headquartered in Singapore, the company employs 23,000 people and has a market capitalization of SGD 12.4 billion. While the total dividends of the company may not be leading in the market, its consistent dividend-paying initiatives are noteworthy.

5. Singapore Exchange (SGX)

Benefiting from the thriving financial services and increasing popularity of investments, the SGX offers healthy dividend yields and provides a combination of stock price growth and attractive risk-return ratios.

6. Dairy Farm

Dairy Farm is a pan-Asian retailer with 10,000 stores and 220,000 employees. The group owns five major brands, including Cold Storage, Manning's, and Maxim's. In 2020, the group's total revenue exceeded USD 28 billion.

7. DBS Group

This multinational banking and financial services corporation is headquartered in Singapore but operates globally. It is the highest-rated banking group in Asia, which is crucial if you're considering long-term investment. DBS Bank's balance sheet is robust in terms of liquidity and capital requirements and focuses on growth.

DBS Bank is Singapore's largest lender, with Q1 2021 financial statements showing a profit of SGD 2 billion, increased fee income, and stable net interest margin. With non-performing loan rates returning to pre-crisis levels, prospects have also improved.

Why Invest in High Dividend Stocks?

Although all investments carry inherent risks, high dividend stocks tend to be on the safer side of the risk-return spectrum. Companies with strong income sources often provide relatively good protection during economic downturns. While they may not perform as well as growth stocks during market rebounds, they offer a stable income source as consolation.

Considerations

Opportunity Cost

Tying cash in higher-risk-averse positions means missing out on seizing the next significant growth investment opportunity. Companies like Amazon and Google, which have seen their stock prices multiply, have never paid dividends.

Instead, they reinvest idle cash into their businesses, making them growth stocks, with their stock prices soaring far beyond those of high-yield Singapore stocks.

Downside Risk

While high-yield stocks are largely insulated from economic downturns, they are not immune. Unprecedented events like those in 2020 shook even the most revered business models. The global economy stagnated, as did international trade. For example, CH Hutchison's stock price hit its lowest level since 2018.

It's worth noting that many investors buy dividend-paying stocks specifically for income. If that is no longer the case, a buying frenzy may ensue as there is nothing else to attract investors.

Optimization Points Still Needed

Dividend yield depends on the price you buy in at. Since dividends paid to shareholders are paid per share you hold, the lower your stock cost, the higher your yield. If Investor A buys stocks at twice the price of Investor B, A's long-term dividend yield will be half of B's.

Ex-Dividend Dates

Dividends often get "priced in" to stock prices. So, selling before the ex-dividend date doesn't necessarily result in a loss.

How to Find Singapore Dividend Stocks?

If you're looking for dividend stocks, the first step is to understand the process of calculating yields. The formula is: Annual dividend per share ÷ Share price, simply dividing the per-share cash dividend paid in a specific year by the cost of purchasing one share of stock.

How to Trade Online Dividend Stocks?

1. Choose a Broker

Finding your target dividend stocks is the first part of the trading process; the second part is selecting the right broker. Since you'll be depositing funds into a new broker account, it's advisable to ask, "How do I find a secure broker?" Any broker regulated by the following financial authorities is worth considering:

Primary Regulators

• Monetary Authority of Singapore (MAS)
• Financial Conduct Authority (FCA) in the UK
• Australian Securities and Investments Commission (ASIC)
• Securities and Exchange Commission (SEC) in the US
• Cyprus Securities and Exchange Commission (CySEC)

Excellent online brokers allow you to conduct all trades and portfolio management on desktop or handheld devices. The added convenience of trading via mobile has attracted many. You can even complete the account registration process when you have some free time.

Brokerage mobile apps and desktop platforms will serve as your personal interface with the market, available for free trial. Setting up a demo trading account takes only a few seconds, usually requiring just an email address.

Once set up, you can test a specific broker's trading experience and practice trading with virtual funds. This is a risk-free way to test both the broker's capabilities and your trading skills, highly recommended before committing real money.

2. Open an Account and Deposit Funds

Opening an account with an online broker and investing in the best dividend-paying stocks in Singapore takes only a few minutes. These few minutes are well spent as holding high-yield stocks long-term can generate income returns over the next few years.

The actual online registration process involves providing some personal information, verifying your email, and uploading identification. Most accounts are confirmed instantly, and then funds can be transferred into the new account. Common payment methods include bank transfers and debit/credit cards, with credit card payments usually arriving immediately. Once funds are in, you can start trading.

3. Research Companies Using Fundamental and Technical Analysis

Successful dividend stock trading relies on researching the long-term prospects of companies. Excellent brokers conduct in-depth fundamental analysis on different stocks. This can take the form of news reports, research reports, or commentary and

 insights from industry experts. Leveraging this free research is an excellent first step. Once you've identified the Singapore top dividend stocks you want to buy, you may need to consider technical analysis to optimize your trading entry points. This approach creates "indicators" by considering historical price data to help traders identify short-term downtrends in prices.

4. Place Orders and Set Position Sizes

The minimum amount of data required to buy Singapore stocks is the quantity you want to purchase. Then click or tap the "Buy" button.

5. Set Stop Losses and Limit Orders

There are other types of orders to consider, including "stop-loss" and "take-profit" orders. These are built-in instructions that automatically close out parts or all of a position when prices reach certain levels. If prices plummet, stop-loss orders can help you close out; if prices rise, take-profit orders can help you lock in profits. If you want to establish a position and then go back to your daily work, stop-loss and take-profit are very useful tools.

Another approach is to manage risk through small trades. Singapore's high dividend stocks are relatively safe investments, but remember, you should only trade with cash you can afford to lose. If that's the case, you won't be emotional in trading and reduce the chance of panicking in the event of a short-term price crash. If you choose not to use stop-loss, you can eliminate the risk of being "stopped out" in moments of flash crashes, where prices plummet suddenly and then return to their "normal" levels.

6. Select and Purchase Dividend Stocks

After entering and checking the trading instructions, simply click "Buy." This will convert some of your cash into a stock position, the value of which will fluctuate based on real-time market prices.

Your gains and losses will be displayed in the portfolio section of your account, advisable to check regularly as it confirms you've bought the stocks you intended to buy. Even experienced investors make "fat-finger" errors, so it's best to correct any mistakes immediately.

One important check is whether you've directly bought high dividend Singapore stocks rather than purchased them in the form of contracts for difference (CFDs). CFDs are a popular trading instrument with some additional features compared to direct purchases. However, they incur daily financing costs. If you plan to hold a high-yield position for longer than a few weeks, avoiding trading in the form of CFDs may be more cost-effective.

Conclusion

Most portfolios have room for Singapore dividend stocks. They're a unique asset class that helps balance the volatile returns of more aggressive strategies. Currently, their returns also outpace those of cash savings accounts. Novices especially can benefit from buying and selling these top dividend stocks in Singapore, now is the time to take action.

When selecting a broker, it's best to consider long-term strategies. For instance, some brokers provide news alerts and research findings to keep you informed of a stock's latest performance. However, selecting a reliable, trustworthy broker should be the top priority.

Dividend stocks may not be the most exciting investment market, but long-term data shows that their risk-return ratio is very reasonable for investor returns.