Every Singaporean’s CPF ordinary account (OA) offers a 2.5% interest that is relatively risk-free.
That’s great, however, the 2.5% interest may not be enough to cover inflation.
Thankfully, the CPF OA allows you to open a CPF Investment Account (IA) where you can invest in stocks and grow your wealth.
Where do you start?
Here are three blue-chip stocks for your CPF IA watchlist.
1. DBS Group Holdings (SGX: D05)
DBS Group is Singapore’s largest bank.
The group provides a wide range of banking services to both individuals and corporations. Under the leadership of CEO Piyush Gupta, who took the helm in 2009, the bank has steadily increased its revenue and net profit over time.
Recent results have been promising.
For the first half of 2024 (1H’24), DBS’s total income increased to S$11 billion, up 11% year on year. Net profit rose in tandem, climbing from S$5.2 billion a year ago to S$5.74 billion in 1H’24.
More importantly, the bank also upped its dividend per share from S$0.82 in 1H’23 to S$1.08 in 1H’24.
If we annualised its 1H’24 dividend payout, DBS’s annual dividend would be S$2.16.
Based on DBS closing price yesterday of S$35.90, this works out to a dividend yield of around 6%, more than double the CPF OA’s interest rate of 2.5%.
On the flip side, investors should keep an eye on interest rates, which are widely expected to be cut before the end of 2024.
A reduction in interest rates could impact the bank’s net interest income.
Meanwhile, CEO Piyush Gupta has announced his retirement.
Deputy CEO Tan Su Shan has been elected to take his place after the bank’s annual general meeting slated for March 2025.
2. Singapore Exchange Limited (SGX: S68)
Singapore Exchange, or SGX, is best known as Singapore’s sole stock exchange operator.
Beyond equities, the company offers a multi-asset platform for the buying and selling of securities such as fixed income (bonds), derivatives and more.
The bourse operator posted a decent set of results for its fiscal year ending 30 June 2024 (FY24).
For the full year, revenue increased by 3.1% year-on-year to S$1.23 billion while net profit climbed 4.7% year-on-year to almost S$598 million.
The group is a consistent generator of free cash flows which can be used to fund dividends.
In August 2024, SGX announced a final dividend of S$0.09, bringing its total FY24 dividend to S$0.345.
At the closing price of S$10.66 yesterday, the group’s shares offer a trailing 12-month dividend yield of 3.2% which is above the CPF OA’s interest rate of 2.5%.
It’s not all a bed of roses, of course.
The local stock market has been struggling with the lack of new company listings.
Earlier in August, the Monetary Authority of Singapore (MAS) announced the formation of a panel to review and propose measures to revitalise the stock market.
3. CapitaLand Integrated Commercial Trust (SGX: C38U)
CapitaLand Integrated Commercial Trust or CICT holds the distinction as the oldest and largest real estate investment trust (REIT) to be listed in the Singapore stock market.
The REIT houses 21 properties in Singapore, two properties in Germany and three properties in Australia.
Since its debut in SGX in 2002 as CapitaLand Mall Trust, CICT is prized for its ability to pay a consistent distribution per unit (DPU).
Recent results suggest that this DPU run will continue.
For 2024’s first half (1H’24), the REIT registered a 2.2% year-on-year increase in gross revenue, with net property income rising by 5.4% year on year.
These gains helped CICT lift its DPU payout from S$0.053 in 1H’23 to S$0.0543 in 1H’24.
Interest rates have dampened its growth, with interest expense rising 8.3% year on year.
Nevertheless, as mentioned earlier, interest rates are expected to decline soon, providing relief to the REIT’s financial expenses.
Get Smart: The need for investing
The CPF scheme was put in place to help Singaporeans build a retirement nest egg.
With the Singapore Government’s Triple-A credit rating, it is as close as you can get to a guaranteed 2.5% interest for your CPF OA to grow your retirement funds.
However, if you are interested in supplementing your income, consider investing your CPF OA money.
The three stocks above represent a starting point for investors to explore further.
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Disclaimer: Chin Hui Leong owns shares in CICT, DBS Group and SGX.
