Imagine receiving an extra pay cheque every month that you don’t have to pay tax on – that’s the alluring promise of dividend investing in Singapore.
But hold up, with so many dividend stocks to choose from, which should you put your capital into for the best dividend income and returns?
Here, we share 5 top-quality Singapore dividend stocks we think you should watch in 2023:
5 top quality Singapore dividend stocks to watch in 2023
| Singapore Dividend Stock | SGX Ticker | Sector | Rationale |
|---|---|---|---|
| Mapletree Logistics Trust | M44U | Logistics REIT | Secular growth |
| Comfort DelGro | C52 | Transportation | Undervalued |
| Jardine Cycle & Carriage | C07 | Conglomerate | Macro |
| Sheng Siong | OV8 | Retail | Income stability |
| ST Engineering | S63 | Defence | Recession proof |
1) Mapletree Logistics Trust (SGX: M44U)
Mapletree Logistics Trust (MLT) just announced an acquisition spree to acquire eight logistics properties in Japan, Australia and South Korea for a combined value of $914 million.
The acquisition plan is part of MLT’s strategy to expand across its key markets and increase modern logistics assets in its portfolio. The assets are strategically located close to major logistics infrastructure and consumption centres in Nagoya, Hiroshima, Sydney and Seoul and are on freehold land.
MLT’s acquisitions have a strong track record of providing DPU and NAV accretion with minimal increase to leverage. This time is no different. Despite the higher interest rate environment, DPU will increase by 2.2%, NAV by 0.6% and leverage by 3.3%.
As MLT grows its portfolio of assets, it will not only be able to gain economies of scales but also cross market its assets to its customers.
For example, the logistics industry is one with secular growth and a company that can provide logistics solutions across key markets for its customers will be able to keep its occupancy levels at robust levels as well as pass on operating cost increases to protect its margins.
Since FY16, MLT has continuously increased its dividends and in FY22, MLT distributed 8.787 cents per unit which amounts to a 5.1% yield.
2) ComfortDelGro (SGX: C52)
If you think local taxis will be replaced by Grab’s private hire, think again.
CDG has 2 key divisions which account for 90% of its revenue, namely the Public Transport Services and Taxi divisions.
In FY22, the Public transport Services division saw a 8.2% increase in revenue. Excluding the gain on disposal of property, operating profit would have decreased slightly. This was due to higher operating costs as well as lower COVID-19 government reliefs.
The Taxi division fared better as revenue increased 2.7% while operating profit nearly tripled. This was due to a reduction in rental discounts and the introduction of taxi fare commissions.
CDG distributed dividends of 8.48 cents which amounts to a yield of 7% for FY22. 3.87 cents of dividends arose from specials as a result of asset disposals and commemoration of company milestones. Hence, we do not expect CDG to maintain this level of dividends in FY23.
It is worth noting that CDG is currently trading near its net asset value of $1.186 and is in a net cash position of about $0.27.
With its strong net cash position, CDG is expected to continue growing its overseas portfolio either by tenders or by acquisitions. To keep the company future-ready, it also intends to invest more than $6 billion to replace its existing fleet with electric vehicles.
3) Jardine Cycle & Carriage (SGX: C07)
Jardine C&C achieved record profit in FY22 as its subsidiaries and associates benefited from the strong economic recovery and higher commodity prices.
Dividends increased 39% from $0.80 to $1.11 in line with higher earnings. Astra remains the largest contributor, accounting for 80% of profit in FY22.
Jardine C&C makes strategic investments either directly or through its investees. In order to prepare its balance sheet for future investments, the company took steps to reduce debt in Jardine C&C in FY22 with its available cash.
Jardine C&C expects growth from THACO, and REE Corporation, its two Vietnamese investees as the Vietnam economy is poised to grow substantially in the near future.
4) Sheng Siong (SGX: OV8)
Sheng Siong was a key beneficiary of the COVID-19 pandemic and recorded a revenue high of nearly $420 million in 2Q2020 due to elevated demand resulting from Singapore’s initiation of a circuit breaker.
Comparing from FY19 to FY22, it is clear that the company has also seen structural growth as the revenue post reopening in FY22 was much higher than the year before the year.
Sheng Siong was also able to increase both its gross and net margins to 29.4% and 10.0% respectively, reflecting the company’s resilience amidst operating costs increases in labour, rental and utilities.
Keeping focused on growth, In January 2023, Sheng Siong leased a 30k sqft retail space in Kunming to open a new store which will be operational by 2Q2023, bringing the total store count to 67 in Singapore and 5 in China.
Sheng Siong provided for a dividend of 6.22 cents in FY22, a slight increase from 6.20 cents in FY21, amounting to a 3.6% yield.
And it continues to bag a good profit:
5) ST Engineering (SGX: S63)
ST Engineering’s revenue increased 17.4% in FY22 to $9 billion. However profit after tax declined 6.3%. Revenue grew across all core segments, namely the Commercial Aerospace, Urban Solutions & Satcom and Defence & Public Security segments.
Profit was lower as there were integration costs from the acquisition of Transcore as well as cost impact from higher energy costs. There were also government support in the prior year which kept profit robust. Excluding these items, net profit would have been 39% higher.
Order book stood at $23.0 billion as at the end of Dec 22 of which $7.2 billion is expected to be delivered in 2023.
Due to the global geopolitical situation, governments globally are expected to increase defence spending. ST Engineering will likely be a direct beneficiary.
ST Engineering provided for a dividend of 16 cents in FY22, a 1 cent increase from FY21, amounting to a yield of 4.3%.
Closing statements
While dividend investing can be rewarding, picking bad dividend stocks usually leads to the painful double whammy of declining dividend income and dropping stock prices.
To help you avoid the possibility of ending up with bags of worthless stocks, we picked 5 top quality Singapore dividend stocks you should watch in 2023.
While the media is constantly bombarding us with depressing news about inflation and recession, we think these high quality companies are worth watching because of reasons such as secular growth, undervaluation, macro positioning, income stability as well as being recession proof.
I’ve also shared about 5 S-REITs that I think are worth watching in 2023 here.
While I’ve given you an overview of how these companies have performed, remember to do your own research (DYOR). I’m not responsible for your losses or gains. Chris shares how he selects the best dividend stocks to build a portfolio that allowed him to retire at 39. If you’re not sure how to DYOR, learn how at his next webinar.