3 Blue-Chips with a Dividend Yield Exceeding Your CPF Ordinary Account

2021-03-22     thesmartinvestor
3 Blue-Chips with a Dividend Yield Exceeding Your CPF Ordinary Account

Blue-chip companies are so named because of their long track record and reputation.

For income-seeking investors, blue-chip businesses are also more consistent in paying out a dividend.

As the world looks towards a nascent recovery, these large businesses are also better equipped to ride the wave.

Many companies have seen their share prices surging in the last 12 months as optimism over vaccine distribution pushes valuations higher.

In turn, this rise has pushed down dividend yields for blue-chip companies.

Despite this, there are three blue-chip companies with dividend yields that exceed the CPF Ordinary Account’s 2.5% interest rate.

Singtel (SGX: Z74)

Singtel is one of Singapore’s three major telecommunication companies (“telco”).

The group provides a comprehensive range of services that include mobile, broadband and pay-TV, with a presence in Asia, Africa and Australia.

In its recent fiscal 2021 third-quarter business update, Singtel continued to be impacted by the ongoing pandemic.

Operating revenue for the first nine months of the fiscal year fell by 9% year on year to S$11.7 billion while operating profit declined by 42.4% year on year to S$923 million.

Despite this, management reported that the group enjoyed its second consecutive quarter of recovery across the business.

There was a silver lining with the Information and Communication Technology, or ICT division which reported a 7.8% year on year growth in revenue to S$2.4 billion. The increase was powered by rising digitalisation.

Looking ahead, the business should start to recover strongly once lockdowns are eased as the pandemic situation improves.

Roaming and prepaid revenues should head higher as economies start opening up again.

Meanwhile, Singtel continues to generate strong free cash flow despite these tough conditions.

For the first six months of its fiscal 2021, the telco generated S$1.6 billion in free cash flow, just slightly lower than the S$1.9 billion in the prior period.

The group declared an interim dividend of S$0.051 for its fiscal half-year.

Together with the final dividend of S$0.0545 declared for its previous fiscal year, the trailing 12-month dividend came up to S$0.1055.

At the last traded share price of S$2.39, dividend yield stood at 4.4%.

Dairy Farm International Holdings Ltd (SGX: D01)

Dairy Farm International, or DFI, is a pan-Asian retailer that operates brick-and-mortar outlets in a variety of formats such as supermarkets, hypermarkets and convenience stores.

2020 turned out to be a challenging year for the group as COVID-19 impacted footfall in its outlets and lockdowns crimped demand for its Health and Beauty segment.

As a result, sales for the full-year fell by 8% year on year to US$10.3 billion while profit attributable to shareholders declined by 16% year on year to US$271 million.

Despite the fall in net profit, free cash flow for the retailer remained strong at US$819.3 million.

The board has recommended a final dividend of US$0.115. When combined with the interim dividend of US$0.05, the full-year dividend came up to US$0.165, 21% lower than that declared and paid out in 2019.

At a share price of US$4.49, the trailing 12-month dividend yield for DFI stands at 3.7%.

Investors can take heart that conditions are improving for the retailer.

During the year, it conducted a refresh of its Giant brand and also launched in-house brand Meadows across all retail formats in Hong Kong, Singapore and Malaysia.

Venture Corporation Limited (SGX: V03)

Venture Corporation is a provider of technology products, services and solutions for a wide variety of clients in the life sciences, fintech and computing fields.

The group has an impressive portfolio of more than 5,000 products and solutions and employs over 12,000 people worldwide.

For its fiscal 2020, revenue fell by 17.1% year on year to S$3 billion, mainly attributed to supply chain disruptions amid lockdowns related to the pandemic.

As a result, profit attributable to shareholders tumbled by 18.1% year on year to S$297.3 million.

Free cash flow for the group remained strong at S$425.1 million.

A final dividend of S$0.50 was declared, bringing the full-year 2020 dividend to S$0.75, an increase from the S$0.70 declared last year.

At the last traded price of S$19.87, the trailing 12-month dividend yield is around 3.8%.

Things are looking up for the electronics giant as the group plans to diversify its offerings to tap on growing industries such as robotics, automation and artificial intelligence.

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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.

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