In some cultures, children leave an Easter basket out overnight for the Easter bunny to fill with delightful treats and toys.
The same basket is also used by children to store eggs found in the traditional Easter egg hunt.
As investors, we too have baskets.
But instead of colourfully decorated eggs, we fill our baskets with carefully-selected stocks.
An income investor’s basket should be filled with stocks that can pay a reliable stream of dividends, even during economic downturns.
Here are three “egg-ceptional” stocks that promise a steady inflow of dividend income for the long-term.
DBS Group Holdings Ltd (SGX: D05)
Singapore’s largest bank demonstrated resilience in a stormy 2020, with profit before allowances reaching a new high of S$8.4 billion.
The bank’s loan book grew by 4% year on year to reach S$371 billion, although a decline in net interest margin (NIM) saw net interest income decline by 6% year on year.
A conservative approach saw the bank set aside S$3.1 billion in allowances, which saw net profit plunge 26% year on year.
Despite the slump in profits, DBS maintained its fourth-quarter dividend at S$0.18 per share, consistent with the two previous quarters.
It brought the bank’s total dividends for 2020 to S$0.87, which represents a 3% yield at the current share price of S$29.
But DBS could raise its dividends soon.
Last year, as the pandemic was raging, the Monetary Authority of Singapore (MAS) called for banks to rein back their dividends to 60% of the previous year.
As we witness a gradual economic recovery, MAS may lift this restriction on the local banks.
These measures look set to improve the bank’s profitability even further.
Sheng Siong Group Ltd (SGX: OV8)
The supermarket chain enjoyed a stellar 2020, with revenue rising 40.6 % year on year to S$1.4 billion and net profit surging 83.1% to S$139.1 million.
Demand for Sheng Siong’s products in 2020 skyrocketed as the pandemic forced people to work and study from home.
As companies make hybrid working arrangements a permanent feature, the tailwinds from that trend look set to continue
In line with the excellent results, Sheng Siong paid dividends totalling S$0.065 per share in 2020, an 83% increase from 2019’s dividend.
But while the pandemic was a great boost to Sheng Siong’s performance, the supermarket giant was already growing steadily in prior years.
Between 2015 and 2019, Sheng Siong’s revenue grew from S$764.4 million to S$991.3 million, for a compound annual growth rate (CAGR) of 6.7%.
Net profit in the same period also rose from S$56.8 million to S$75.8 million.
Sheng Siong opened five new outlets in Singapore in 2020 and will continue to expand its current portfolio of 63 outlets.
As the supermarket chain grows its footprint, shareholders could also enjoy larger dividend distributions going forward.
Keppel DC REIT (SGX: AJBU)
Keppel DC REIT is one of the major beneficiaries of the COVID-19 pandemic.
The REIT’s portfolio of 19 data centre assets generated revenue of S$265.6 million in 2020, a year on year improvement of 36.3%.
Correspondingly, total distributable income to unitholders also rose by 38.6% year on year to reach S$156.9 million.
Keppel DC REIT’s distribution per unit (DPU) for 2020 was S$0.0917, a year on year improvement of 20.5%.
The REIT’s strong performance of 2020 was due to the COVID-19 pandemic compelling many companies to digitize rapidly, boosting demand for data centres.
This trend is expected to continue, with enterprise spending on cloud infrastructure forecasted to grow at 22% CAGR over the next five years.
Apart from being boosted by strong industry fundamentals, the REIT is making its own moves to grow quickly.
In December 2020, the REIT acquired Amsterdam Data Centre for approximately S$48.1 million, strengthening its presence in one of Europe’s data centre hubs.
The REIT is also proactively pursuing asset enhancement initiatives (AEI) and has increased occupancy rates at two of its properties in Singapore.
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Disclosure: Herman Ng does not own shares in any of the companies mentioned.