For many investors, blue-chip stocks form the basis of their investment portfolio.
These companies are characterized by stability and offer a certain degree of security in being able to survive various economic cycles.
The good news is that most blue chip stocks also pay a regular dividend, which can be part of an income investor’s passive income stream.
We have selected three attractive blue-chip stocks that could increase their dividends next.
OCBC Ltd (SGX: O39)
OCBC is Singapore’s second largest bank and offers a comprehensive range of banking, insurance and investment services.
The bank has benefited from the rising interest rate environment over the past two years.
Net profit increased 27% year-on-year to a new record of S$7 billion in 2023, driven by a 25% year-on-year increase in net interest income to S$9.6 billion.
Total revenue increased 20% year-on-year to S$13.5 billion last year, driven by a 7% year-on-year increase in noninterest income.
In parallel with the improved results, OCBC declared and paid a total dividend of S$0.82 for 2023, 20.6% more than the S$0.68 paid a year ago.
In particular, investors should note that the lender increased its interim dividend by almost 43% year-on-year, from S$0.28 to S$0.40.
In the first quarter of 2024 (Q1 2024), OCBC continued its strong earnings momentum.
Total revenue increased 8% year-on-year to S$3.6 billion, pushing net profit to a quarterly record of S$1.98 billion, up 5% year-on-year.
If the bank continues to post healthy earnings growth, its interim dividend could increase year-on-year when it announces its first-half 2024 results on August 2.
OCBC recently made a takeover offer for Great Eastern Holdings, which should enable the bank to increase its earnings and improve its return on equity.
The Greater China business unit aims to generate additional revenue of S$3 billion between 2023 and 2025, in addition to the bank’s normal growth trajectory.
Singapore (SGX: Z74)
Singtel is Singapore’s largest telecommunications company (telco), offering services such as mobile communications, broadband, pay-TV and cybersecurity, among others.
For the fiscal year ended March 31, 2024, the telco reported higher underlying net profit of S$2.26 billion, up 10% year-on-year.
The improved result is due to higher contributions from regional subsidiaries and higher interest income.
In addition, the Group announced a total dividend of S$0.15 for the financial year 2024, an increase of 52% from the previous year’s figure of S$0.099.
The FY2024 dividend included a Value Realisation Dividend (VRD) of S$0.038, a new dividend category funded by the repayment of excess capital.
This VRD, which will range between S$0.03 and S$0.06 annually, is embedded in Singtel’s dividend policy and does not represent a one-off payment.
The good news is that the telco has identified an asset recycling pool worth around SGD 6 billion that can be monetized in the future to help further fund this dividend.
For the financial year 2025, Singtel intends to expand its regional data center platform and launch its new GPU-as-a-Service business in collaboration with NVIDIA (NASDAQ: NVDA).
The Group has launched its ambitious long-term value creation plan ST28 to target sustainable growth in both core earnings and dividends.
Recently, Singtel’s Thai partner Advanced information services (SGX: TADD) announced a restructuring exercise that will deliver one-off gains of approximately S$400 million to the telecommunications company.
If Singtel’s business continues to flourish and the telco identifies further monetization targets, it could increase its core dividend and pay out the top portion of its VRD.
Singapore Technology Engineering (SGX: S63)
Singapore Technology Engineering (STE) is a technology and engineering company with clients in the aerospace, smart city, public safety and defense sectors.
The group’s revenue increased 11.8% year-on-year to S$10.1 billion in 2023.
STE’s core operating profit increased 24% year-on-year to S$610 million (excluding one-off items).
The engineering firm paid a final dividend of S$0.04, bringing the full-year 2023 dividend to S$0.16.
STE has released an encouraging business update for the first quarter of 2024.
Revenue continued to grow, increasing 18% year-on-year to S$2.7 billion.
The Group also won new contracts totaling S$3 billion during the quarter, bringing its order book to S$27.7 billion as of March 31, 2024.
An interim dividend of S$0.04 was declared and paid.
If STE can maintain its earnings momentum and continue to generate positive free cash flow, there is a good chance that the engineering giant will be able to increase its quarterly dividend.
If you want to enjoy a comfortable retirement in this time of high inflation, subscribe to our FREE email series, Secrets to Becoming a Singapore Stock Market Millionaire. Get 5 daily emails with investment tips to help you build a recession-proof retirement portfolio. Easy to implement and suitable for any investment experience. Click here to sign up now.
Ready to discover the next $100 billion stock? Our latest FREE report takes an in-depth look at five popular SGX companies that many believe are the next big thing. Read our team’s findings to help you determine your investment strategy. Click the link here to download it now.
Follow us on Facebook and Telegram to get the latest investment news and analysis!
Disclosure: Royston Yang has no ownership interests in any of the companies mentioned.
The post 3 Singapore Blue-Chip Stocks That Could Potentially Increase Their Dividends appeared first on The Smart Investor.
