Blue chips are so named because they are established companies that offer stability and reliability.
Such dependability is a valuable trait as markets roil from the twin headwinds of high inflation and soaring interest rates.
Through it all, blue-chip stocks act as bastions of stability as they continue to churn out healthy profits and cash flows.
What’s more, all of them also pay out a dividend that will delight income-seeking investors.
Even while facing these challenges, several blue-chip stocks are seeing their business doing well.
Here are three that look well-positioned to pay out a higher dividend this year.
Genting Singapore Ltd (SGX: G13)
Genting Singapore is the owner and operator of the integrated resort (IR) at Resorts World Sentosa (RWS) in Singapore.
The IR boasts six hotels with more than 1,600 hotel rooms, a casino, a Universal Studios theme park, and one of the world’s largest aquariums – S.E.A. Aquarium.
The IR operator reported a commendable set of earnings for 2022 as border reopenings led to a flood of tourists and visitors to its attractions.
Revenue surged 62% year on year to hit S$1.7 billion as the group enjoyed a broad-based recovery for both its gaming and non-gaming divisions.
Operating profit doubled year on year to S$456.4 million while net profit surged 85% year on year to S$340.1 million.
Genting Singapore saw its operating cash flow more than double year on year to S$806.7 million,
Free cash flow also turned positive for 2022, clocking in at S$619.7 million versus a free cash outflow of S$567 million a year ago.
With China opening its borders earlier this year, Genting Singapore should see a stronger influx of tourists from the Middle Kingdom that should boost its 2023 numbers.
The RWS 2.0 expansion projects should also increase the attractiveness of the IR as a destination for locals and foreigners.
This month saw the debut of Van Gogh: The Immersive Experience, an exhibition combining art and virtual reality at RWS’ refurbished theatre space.
Come May, the newly-renovated Festive Hotel will re-launch as a lifestyle destination hotel with an additional 389 rooms.
Investors can look forward to better profits and higher free cash flow generation that could translate into a higher dividend payment.
Sembcorp Industries Ltd (SGX: U96)
Sembcorp Industries Ltd, or SCI, is a utility and urban development group.
The group has a balanced energy portfolio of 17.2 GW and an urban development project portfolio spanning 12,000 hectares across Asia.
SCI more than tripled its 2022 net profit and also declared a special dividend of S$0.04 in tandem with the strong numbers.
The utility group continues to build and grow its renewables portfolio, in line with what management communicated during its Investor Day.
Earlier this month, the group completed its acquisition of 795 MW of solar assets in China, lifting its renewables portfolio of solar and wind energy assets to 9.8 GW (including acquisitions pending completion).
SCI was also awarded its maiden greenfield renewables project in the Middle East to build, own and operate an independent power project in Oman.
The 500 MW solar power plant will be operational by 2025 and is accompanied by a 20-year power purchase agreement.
Not forgetting its Urban Development division, the group has signed memorandums of understanding with nine provinces in Vietnam to develop smart and sustainable industrial parks.
These business developments should benefit SCI in 2023 and usher in better profits, with the chance that the utility group may increase its dividend.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is a data centre REIT with a portfolio of 23 data centres located in nine countries with a total value of S$3.7 billion as of 31 December 2022.
The REIT has an impressive track record of increasing its distribution per unit (DPU) every single year without fail since its IPO in 2014.
Keppel DC REIT also boasts a strong sponsor in conglomerate Keppel Corporation Limited (SGX: BN4).
Its sponsor has a pipeline of more than S$2 billion worth of data centres that can potentially be injected into the REIT.
For this year, the REIT manager will continue to scout for suitable acquisitions to further boost DPU.
With an aggregate leverage of 36.4% and a low cost of debt of 2.7%, the REIT still has sufficient debt headroom to increase its payout.
Furthermore, more than half of Keppel DC REIT’s portfolio’s leases have built-in income and rental escalations based on the consumer price index or a similar index.
These increases should help the REIT’s rental income to keep pace with the inflation rate while the manager may also undertake asset enhancement initiatives (AEI) to further boost distributable income.
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Disclosure: Royston Yang owns shares of Keppel DC REIT.
