When it comes to your retirement, having peace of mind is a top priority.
After spending almost half a lifetime working, it’s great to be able to look forward to your golden years.
Having a robust retirement portfolio can help you get to where you want to go.
The process isn’t difficult to understand.
Build up a portfolio of great companies that can compound your wealth over the long-term.
Reinvest your dividends to add on to the overall value of this portfolio.
What’s required, though, are patience and consistency in both choosing strong companies to buy, as well as holding on to them over the years.
Blue-chip companies can provide a level of stability that smaller companies may not be able to offer.
Of course, you have to be discerning and not put your money down on just any blue-chip company, as some may turn out to be value traps.
Here are two blue-chip companies that offer a great mix of both growth and dividends.
This combination of attributes will be perfectly suited for a retirement portfolio as it can beat inflation and also provide a growing stream of steady income.
DBS Group Holdings Ltd (SGX: D05)
DBS is one of Singapore’s three largest banks.
The group has a presence in 18 markets and provides a full range of services in consumer, SME and corporate banking.
Recently, DBS was also named the best bank in the world by New York-based financial publication Global Finance for a third consecutive year.
For the first half of 2020, the bank reported total income of S$7.8 billion, up 7% year on year.
Profit before allowances was up 12% year on year to a new high of S$4.7 billion.
Due to the COVID-19 pandemic, allowances for credit losses jumped up six-fold to S$1.9 billion, leading to a 26% year on year fall in net profit.
Despite the poorer net profit showing, DBS’ franchise remains strong and the group is well-positioned to ride through the crisis.
The bank is adequately capitalised and has, so far, witnessed minimal loan book stress.
An interim dividend of S$0.18 was declared for the second quarter, down from the S$0.33 declared in the previous quarter.
The reason was because of the Monetary Authority of Singapore (MAS) calling on local banks to limit their dividend payments to 60% of the prior year’s dividends, for the sake of prudence.
CEO Piyush Gupta has reiterated in a buy-side analyst conference call that DBS would have been able to maintain the S$0.33 dividend if not for MAS’ guidance.
With many years of growth ahead of it and the ability to restore dividends once the crisis has abated, DBS counts as a good candidate for a retirement portfolio.
Venture Corporation Limited (SGX: V03)
Venture is a leading global provider of technology solutions, products and services.
The group manages a portfolio of more than 5,000 products serving a wide range of industries such as life science, lifestyle consumer technology and genomics, and employs over 12,000 people worldwide.
For the first half of 2020, Venture reported a 25.5% year on year decline in revenue to S$1.36 billion, largely due to supply chain disruptions and factory lockdowns in various countries caused by the pandemic.
However, the situation improved in the second quarter and revenue was up 2.9% quarter on quarter, while net profit jumped 16.4% over the same period.
Net margin also improved to 10.1% from 9% during the quarter due to an improved product mix, as the group witnessed a recovery during May and June.
As a show of confidence in its prospects, Venture raised its interim dividend to S$0.25 from S$0.20 a year ago.
The electronics and semiconductor industries are still doing well despite the pandemic, as increased demand for smart devices and cloud computing act as drivers for long-term growth.
Venture expects the recovery to extend into the second half of 2020, and its labs have plans to release several newly developed products into manufacturing in early 2021.
Investors should gear up for steady and sustained long-term growth as Venture is a key contract manufacturer for many large clients.
Dividends should also rise in tandem with the growth in profits and cash flow, making Venture an ideal candidate for a retirement portfolio.
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Disclaimer: Royston Yang owns shares in DBS Group Holdings Ltd.
