The Central Provident Fund, or CPF, is a splendid forced-savings scheme that allows people to build up their retirement fund.
The CPF Ordinary Account (OA) offers a near risk-free interest rate of 3.5% on the first S$20,000, and amounts above this threshold earn 2.5% if you are below 55 years old.
Although this may sound like a decent return, it’s important to note that inflation has been creeping up recently.
Singapore’s core inflation hit 2.2% in February, easing slightly from 2.4% in January.
However, overall inflation rose by 4.3%, the highest in nine years, propelled by the higher cost of petrol and cars.
Such an environment may spur you to look for ways to grow your CPF savings at a higher rate than what the government is offering.
Fortunately, CPF offers the option of opening an investment account, called a CPF Investment Account.
With this account, you can start to buy shares of well-run companies that can help you to beat inflation.
Here are three Singapore blue-chip stocks that can hasten the growth of your CPF funds.
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 has remained resilient throughout the pandemic.
For its recent fiscal 2022 first half ended 31 December 2021, the group reported revenue of S$522 million, comparable to the level a year ago.
Net profit, however, dipped by 9% year on year to S$219 million.
Despite the weaker results, SGX declared an interim quarterly dividend of S$0.08, unchanged from a year ago.
Trailing 12-month dividend stands at S$0.32, giving its shares a yield of around 3.3%.
The group continues to invest in growing its business and has made S$1 billion worth of acquisitions in the last two years.
SGX’s wide suite of China access products also allow investors and fund managers to tap into the growth of the Middle Kingdom.
The setup of a foreign exchange electronic communication network will also allow the group to tap on different liquidity pools to attract more clients.
These initiatives are part of what SGX communicated during its Analyst Day last year, in which it described itself as occupying a “sweet spot” for growth.
Keppel DC REIT (SGX: AJBU)
Moving on to the REITs space, we have Keppel DC REIT, a data centre-focused REIT that owns a portfolio of 21 data centres spread across nine countries.
The REIT’s assets under management stood at S$3.5 billion as of February 2022.
Keppel DC REIT reported a respectable set of earnings for its fiscal 2021 (FY2021).
Gross revenue inched up 2.1% year on year to S$271.1 million while net property income rose 1.6% year on year to S$248.2 million.
Distribution per unit increased by 7.4% year on year to S$0.09851, giving the REIT’s units a trailing distribution yield of 4.4%.
The REIT’s aggregate leverage stood at 34.6% as of 31 December 2021, providing sufficient debt headroom for acquisitions.
The average cost of debt remained low at 1.6% while interest coverage was high at 10.8 times.
Keppel DC REIT had engaged in yield-accretive acquisitions last year that should boost its DPU for 2022.
The REIT had acquired two data centres in London and the Netherlands and also made its maiden data centre acquisition in Guangdong, China.
United Overseas Bank Ltd (SGX: U11)
United Overseas Bank Ltd, or UOB, is one of Singapore’s three big banks.
The lender has proven its mettle by reporting a S$4 billion net profit for FY2021 as it enjoyed record-high fee income and steady loan growth.
A final dividend of S$0.60 was declared, bringing the total FY2021 dividend to S$1.20 per share.
The bank’s shares offer a trailing dividend yield of 3.7%.
UOB expects this positive momentum to carry on into this year as the bank forecasts mid to high single-digit year on year loan growth.
The US Federal Reserve also announced its first quarter-point rate hike since 2018 and has signalled that it may continue to raise rates in response to surging inflation.
These interest rate increases will result in higher net interest income for the bank.
Meanwhile, UOB has also been active on the acquisition front.
Two months ago, it agreed to acquire Citigroup’s (NYSE: C) consumer banking business in four countries — Malaysia, Indonesia, Thailand, and Vietnam.
This move should accelerate the growth of its customer base in these four countries and enable the bank to grow more swiftly.
Not sure which REIT to put your money in? Use our 7-step REIT checklist to find one that fits into your retirement plan. Checklist is inside our latest FREE report “Singapore REITs Retirement Plan”. Click here to download it now.
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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited and Keppel DC REIT.
