Blue-chip stocks are included by many investors as the bedrock of their investment portfolios.
These businesses exhibit stability and offer a measure of certainty that they can weather various economic cycles.
The great news is that most blue-chip stocks also pay out a regular dividend that can form part of an income investor’s passive income stream.
We have lined up three attractive blue-chip stocks that could be the next in line to increase their dividends.
OCBC Ltd (SGX: O39)
OCBC is Singapore’s second-largest bank and offers a comprehensive suite of banking, insurance, and investment services.
The bank has benefitted from the rising interest rate environment over the past two years.
Its 2023 net profit jumped 27% year on year to a new record of S$7 billion on the back of a 25% year-on-year increase in net interest income to S$9.6 billion.
Total income for last year rose 20% year on year to S$13.5 billion, boosted by a 7% year-on-year rise in non-interest income.
In tandem with the better results, OCBC declared and paid out a total dividend of S$0.82 for 2023, 20.6% higher than the S$0.68 paid out a year ago.
In particular, investors should note that the lender had raised its interim dividend by nearly 43% year on year from S$0.28 to S$0.40.
For the first quarter of 2024 (1Q 2024), OCBC continued its strong earnings momentum.
Total income rose 8% year on year to S$3.6 billion, resulting in net profit hitting a quarterly record of S$1.98 billion, up 5% year on year.
Should the bank continue to see healthy earnings growth, its interim dividend could rise year on year when it reports its first half of 2024 earnings on 2 August.
OCBC recently launched a takeover offer for Great Eastern Holdings that should enable the bank to increase its earnings and elevate its return on equity.
Its Greater China division is also targeting to achieve S$3 billion in incremental revenue from 2023 to 2025 in addition to the bank’s normal growth trajectory.
Singtel (SGX: Z74)
Singtel is Singapore’s largest telecommunication company (telco) and offers services such as mobile, broadband, pay TV, and cybersecurity, among others.
For its recent fiscal 2024 (FY2024) earnings ending 31 March 2024, the telco reported a higher underlying net profit of S$2.26 billion, up 10% year on year.
The better result came from higher contributions from its regional associates coupled with higher interest income.
In addition, the group declared a total dividend of S$0.15 for FY2024, a 52% year-on-year jump over the prior year’s S$0.099.
The FY2024 dividend included a value realisation dividend (VRD) of S$0.038 which is a new dividend category funded by the return of excess capital.
This VRD, which will range between S$0.03 to S$0.06 annually, will be embedded into Singtel’s dividend policy and is not a one-off payment.
The good news is that the telco has identified an asset recycling pipeline of around S$6 billion that can be monetised in the future to help continue funding this dividend.
For FY2025, Singtel intends to scale up its regional data centre platform and pilot its new GPU-as-a-service business in collaboration with Nvidia (NASDAQ: NVDA).
The group launched its ambitious ST28 long-term value creation plan to seek sustainable growth in both core earnings and dividends.
Recently, Singtel’s Thai associate Advanced Info Services (SGX: TADD) announced a restructuring exercise that will net the telco around S$400 million in one-off gains.
Should Singtel’s business continue to flourish and the telco identifies more monetisation targets, it could increase its core dividend and pay out the higher end of its VRD.
Singapore Technology Engineering (SGX: S63)
Singapore Technology Engineering, or STE, is a technology and engineering firm with clients in the aerospace, smart city, public security, and defence.
The group saw its revenue for 2023 increase by 11.8% year on year to S$10.1 billion.
STE’s core operating profit was up 24% year on year to S$610 million after excluding one-off items.
The engineering firm paid out a final dividend of S$0.04, taking 2023’s full-year dividend to S$0.16.
For 1Q 2024, STE released an encouraging business update.
Revenue continued to rise, climbing by 18% year on year to S$2.7 billion.
The group also snagged a total of S$3 billion in new contracts for the quarter, pushing its order book to S$27.7 billion as of 31 March 2024.
An interim dividend of S$0.04 was declared and paid out.
If STE can keep up its earnings momentum and continue to generate positive free cash flow, there is a good chance the engineering giant can up its quarterly dividend.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
