“The seaweed is always greener in somebody else’s lake.”
You might be familiar with the Disney classic, The Little Mermaid, where Sebastian, the king’s trusty crab, tries to convince Ariel not to venture beyond the familiar ocean.
For many investors, the Straits Times Index (SGX: ^STI) plays a similar role – a comforting, well-charted sea of dependable dividend payers.
After all, it’s hard to say no to passive income, whether it’s to live off during retirement or as a steady top-up to your monthly pay cheque.
But just like Ariel’s curiosity, the urge to explore what lies beyond the surface can sometimes pay off.
Outside the familiar blue-chip waters lies the small-cap space – companies with market capitalisations below S$1 billion – where select names offer yields that rival that of their larger peers.
Today, we’ll explore three of these dividend stocks.
SBS Transit (SGX: S61)
SBS Transit is Singapore’s largest bus operator and runs three major rail lines (North East Line, Downtown Line, and Sengkang-Punggol LRT), while also generating revenue from commercial operations like advertising and facility rentals.
As of market close last Friday, its market capitalisation stood at S$1 billion.
The first half of 2025 (1H2025) presented mixed results.
Revenue declined 4.5% year on year (YoY) to S$745.9 million, while profit attributable to shareholders fell 7.7% to S$31.1 million.
The primary culprit?
The loss of the Jurong West bus package in August 2024, which reduced bus mileage.
However, the transport operator demonstrated resilient cash generation, posting S$29.1 million in free cash flow versus a negative S$23.8 million a year earlier, a remarkable turnaround that bodes well for dividend sustainability.
SBS Transit’s financial position should catch the eyes of income investors – S$340.8 million in cash with zero debt as of 30 June 2025.
This enabled management to increase the interim dividend by 60% to S$0.0895 per share, signaling confidence in future cash flows despite operational challenges.
Looking ahead, the outlook is nuanced.
Rail operations should benefit from steady ridership growth and scheduled fare increases in December 2025, but its bus operations face continued pressure from losing the Tampines Bus Package tender to Go-Ahead Singapore, effective July 2026.
While rising manpower costs present a challenge, management expects fuel and energy costs to ease, providing some margin relief.
For retirees seeking passive income, SBS Transit offers the stability of essential public services backed by government contracts, a debt-free balance sheet, and a management team willing to reward shareholders when cash flows improve.
Old Chang Kee (SGX: 5ML)
A household name in Singapore, famed for their curry puffs and fried snacks, Old Chang Kee operates 80 retail outlets.
With a market capitalisation of S$136 million, this modest-sized operator punches above its weight in profitability.
The fiscal year ended 31 March 2025 (FY2025) showcased the company’s operational efficiency.
While revenue grew modestly by 1% to S$102.0 million, boosted by new outlets and expanded catering channels, net profit surged 17% to S$11.3 million.
Gross margin expansion improved to 69.2% from 67.6% a year earlier, stemming from better food cost management, strategic pricing, and lower utilities and production staff costs, which demonstrated Old Chang Kee’s ability to protect profitability despite a challenging operating environment.
The company’s financial foundation remains solid, with S$58.5 million in cash and deposits against minimal debt of just S$1.7 million as of 31 March 2025.
Free cash flow generation remained healthy at S$23.2 million, though down 7% YoY, due to working capital movements and modest capital investments.
Supported by strong cash generation and a conservative balance sheet, the board maintained a total dividend at S$0.02 per share for FY2025, consisting of an interim and proposed final dividend of S$0.01 each.
Nevertheless, Old Chang Kee faces inflationary headwinds, particularly rising raw materials and labour costs compounded by Singapore’s tight manpower market, which it plans to counter through continued cost optimization, margin improvement initiatives, and streamlining operations.
Strategic expansion at high-traffic locations like transport hubs should support revenue diversification beyond traditional retail outlets.
For income-seeking retirees, Old Chang Kee offers exposure to a resilient consumer staple business with proven pricing power and margin management capabilities.
VICOM (SGX: WJP)
VICOM holds a commanding 72% market share in Singapore’s vehicle inspection sector, providing mandatory vehicle inspections that meet safety and environmental standards, as well as offering non-destructive testing, mechanical testing, and calibration services to manufacturing and construction industries.
Trading at a market capitalisation of S$564 million, VICOM operates in a predictable, regulation-driven sector with high barriers to entry.
1H2025 saw impressive results: revenue surged 24.1% YoY to S$69.9 million, propelled by the Electronic Road Pricing 2.0 On-Board Unit (OBU) installation project and stronger testing volumes from manufacturing and construction sectors.
Profit attributable to shareholders grew 10.2% to S$15.6 million, demonstrating solid operational leverage despite the substantial revenue expansion.
Free cash flow declined to S$6.0 million (from S$10.0 million a year earlier) due to S$13.3 million in capital expenditure, primarily for its new Jalan Papan integrated testing centre scheduled to open in early 2026 and aimed to enhance capacity and efficiency for years to come.
Meanwhile, VICOM’s balance sheet remains fortress-like with S$55.6 million in cash and zero debt as of 30 June 2025.
With that, shareholders were rewarded with an interim dividend of S$0.031 per share, marking a 10.7% increase from the S$0.028 paid a year ago, reflecting management’s confidence in the company’s earnings trajectory.
Ongoing demand from the ERP 2.0 OBU installation is expected to drive performance through 2H2025.
However, potential US tariffs could create uncertainty for Singapore’s manufacturing sector, which may dampen demand for non-vehicle testing services.
For retirement portfolios, VICOM offers a rare combination of regulatory moat, dominant market position, and infrastructure-driven growth, backed by a pristine balance sheet that supports sustainable dividend growth.
Get Smart: Dive Deeper for Steady Dividends
Reliable passive income isn’t confined to the STI.
For investors willing to look beyond the index, small-cap dividend stocks like SBS Transit, Old Chang Kee, and VICOM demonstrate that stability, margin strength, and earnings growth can coexist with attractive yields.
All three share disciplined management, solid balance sheets, and consistent dividend histories, key traits for sustaining long-term passive income.
In the end, Sebastian may have to eat his words, for the greener seaweed isn’t always in somebody else’s lake.
Sometimes, it’s right here in Singapore’s small-cap waters.
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Disclosure: Calvina Lee does not own any of the shares mentioned. Chin Hui Leong contributed to the article and owns shares of VICOM.
