3 Ways to Boost Your Retirement Passive Income as the Economy Recovers

2021-02-28     thesmartinvestor
3 Ways to Boost Your Retirement Passive Income as the Economy Recovers

The good news continues to flow in as we move one step closer to conquering COVID-19.

A real-world study on the efficacy of Pfizer’s (NYSE: PFE) vaccine has shown that its two doses are highly effective at cutting symptomatic cases by 94% across all age groups.

The incidence of severe illnesses was also reduced by nearly as much.

And in a sign that the arsenal of weapons against the coronavirus is expanding, the US Food and Drugs Administration (FDA) has just granted emergency use of Johnson and Johnson’s (NYSE: JNJ) COVID-19 vaccine.

With more vaccines being produced by pharmaceutical companies, the challenge now is to distribute them to those who need them the most.

The next few months should see a sharp improvement in the pandemic situation as more and more people get inoculated.

Governments may eventually feel comfortable enough to finally lift the drastic border closures and lockdowns currently in place in many countries.

When this happens, the recovery should be swift as pent-up demand for travel, tourism and dining out explodes.

For an income-seeking investor, here are three ways you can boost your retirement passive income as the recovery takes hold.

1. Companies that will rebound

A myriad of industries was badly hit when the pandemic broke out in February last year.

Sectors such as tourism, travel, hospitality and retail bore the brunt of the economic damage wreaked by the virus.

However, some of these businesses retain a strong franchise and will be able to recover once the crisis has passed.

Take SATS Ltd (SGX: S58), for instance.

The ground handler and airline catering business was badly affected when aviation volumes took a massive plunge due to grounded flights.

For its fiscal 2021 third quarter, flights handled plunged 84% year on year to 14,600, while the number of passengers handled dived 95.4% year on year to just 1.1 million.

Aviation-related revenue fell sharply to S$145.2 million for the quarter, down a massive 67.1% year on year.

However, the group has adapted to the situation and opened up new sources of revenue by handling the COVID-19 vaccine inbound and transshipments across Asia.

SATS is also expanding its non-travel-related revenue streams by supplying food to food and beverage chains such as Costa Coffee and Starbucks (NASDAQ: SBUX).

Dividends have been suspended for now to conserve cash during this period.

But when the crisis has passed and the group’s business picks up again, it should resume the payment of dividends.

Another example is Genting Singapore Limited (SGX: G13).

The integrated resort operator saw full-year 2020 revenue dive 57% year on year and net profit plunge by 90% year on year as tourism all but dried up.

However, the group still declared a final dividend of S$0.01, which was noticeably lower than the previous year’s S$0.025.

Once tourism resumes in earnest, Genting Singapore should see its fortunes improve.

2. Compounding dividends from REITs

Income investors should know by now that REITs offer a source of stable dividends.

By owning a basket of strong REITs, you can continue to receive a steady stream of passive income even through this crisis.

And you may be surprised to know that a good number of REITs have even raised their year on year distribution per unit (DPU) despite the tough challenges.

With the dividends received, you can buy more units in REITs that are backed by strong fundamentals and sponsors.

This method of compounding your dividends will ensure you end up with a steadily growing dividend stream in years to come.

3. Resilient, thriving businesses

A third effective method to grow your passive income stream is to purchase companies that remain resilient during the pandemic.

Some have even thrived and have raised their dividends despite the challenges.

One example is Sheng Siong Group Ltd (SGX: OV8).

The heartland supermarket operator recently reported a sparkling set of full-year earnings for 2020.

Revenue for the year increased by 40.6% year on year to S$1.4 billion while net profit surged by almost 84% year on year to S$139.1 million.

A final dividend of S$0.03 was declared by the group, bringing the full-year dividend to S$0.065.

This dividend was an 83% year on year increase from 2019’s S$0.0355.

Then there are global businesses such as Starbucks and Nike (NYSE: NKE) that have continued to raise dividends through the crisis.

Starbucks recently announced a dividend per share increase from US$0.41 to US$0.45 per quarter, marking its 10th consecutive yearly increase.

Not to be outdone, Nike continues to post strong numbers and announced its 19th consecutive yearly increase in dividends from US$0.245 per share to US$0.275.

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Disclaimer: Royston Yang owns shares in SATS Ltd, Starbucks and Nike.

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