There’s good news all around as borders reopen and air travel resumes.
Economic activity is picking up as consumers open their wallets for vacations and family meals.
However, high inflation is a dampener that threatens to derail the recovery.
In response, the US Federal Reserve has hiked interest rates by 0.75 percentage points, its biggest move in 28 years.
Back home, Prime Minister Lee Hsien Loong has also cautioned that Singapore may face a possible recession in the next two years.
Income-driven investors may feel jittery about whether stocks can continue to pay out dividends in this climate.
Several stocks have continued to pay out dividends through both good times and bad.
We feature three that are not just resistant to recessions, but also possess a high likelihood of continuing to pay out dividends even during a downturn.
Raffles Medical Group (SGX: BSL)
Raffles Medical Group, or RMG, is an integrated healthcare services provider that operates in 14 cities within five countries in Asia.
The group’s network includes three tertiary hospitals and over 100 multidisciplinary clinics that offer a comprehensive range of healthcare and diagnostic services.
RMG has paid out an increasing dividend over the last 11 years.
Adjusted for its three-for-one share split, RMG paid out a dividend of S$0.0116 in fiscal 2010 (FY2010).
For FY2021, the total dividend paid out more than doubled to S$0.028.
During the Great Financial Crisis (GFC) from 2008 to 2009, the healthcare group continued paying out dividends as well.
Being in the healthcare industry, RMG should enjoy a certain level of demand for its services that is unaffected by a recession.
The group reported a good set of earnings for FY2021 with revenue and net profit rising by 27.4% and 27.7% year on year, respectively.
RMG remains cautiously optimistic that foreign patients will resume treatment in Singapore, and that its hospitals in China will see improved patient loads.
Singapore Exchange Limited (SGX: S68)
Singapore Exchange Limited, or SGX, is Singapore’s sole stock exchange operator.
The bourse operator enjoys a natural monopoly and is resilient to economic cycles as it provides an essential service by allowing companies to access the capital markets for fundraising.
SGX has a stellar track record of dividend payments through multiple recessions.
The middle of 2001 saw Singapore’s economy go through its first recession after the Asian Financial Crisis of 1997-1998.
Yet, SGX still paid out dividends of S$0.055 and S$0.057 in FY2001 and FY2002, respectively.
During the GFC, SGX did slash its annual dividend from S$0.38 in FY2008 to S$0.26 in FY2009.
Yet, a dividend was still paid which is important for investors seeking passive income.
The most recent recession in 2020 saw the bourse operator continue to pay out annual dividends of S$0.305 in FY2020 and S$0.32 in FY2021.
The examples above demonstrate the resilience of SGX’s business and showcase how highly free cash flow-generative it is.
SGX can likely continue to churn out dividends to investors should Singapore face another economic downturn.
VICOM Limited (SGX: WJP)
VICOM is an inspection and testing company that conducts a comprehensive range of testing services for vehicles and also for the mechanical and biochemical sectors.
A subsidiary of land transport giant ComfortDelGro Corporation Limited (SGX: C52), the group performed more than 520,000 vehicle checks last year and commands a 74.7% market share of the Singapore vehicle inspection market in 2021.
VICOM has a long history of paying out dividends and has done so since the turn of this century.
In 2001 and 2002, it paid out dividends of S$0.0075 and S$0.0125, respectively.
During the GFC, VICOM even raised its 2009 dividends to S$0.0295 from S$0.023125 in 2008.
And during the pandemic, the group did not pay an interim dividend for 2020 but still paid out a final dividend of S$0.0622.
For 2021, the vehicle inspection specialist paid out a higher dividend of S$0.0828.
VICOM’s business generates copious levels of free cash flow and the group also had no debt as of 31 March 2022.
These attributes put it in a good position to continue paying out reliable dividends should another crisis come along.
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Disclaimer: Royston Yang owns shares of Raffles Medical Group, VICOM Limited and Singapore Exchange Limited.