You have seen it by now.
As the new year begins, friends and colleagues are sharing stories of their recent holidays and well-deserved breaks from work. Maybe you’re doing the same.
Destinations such as Japan and Taiwan are perennial favorites, while some are venturing farther afield—a Santorini getaway, or family time strolling down Las Ramblas in Barcelona.
But here’s a thought: What if your holiday expenses were covered entirely by your dividends?
Extra money for the holidays
Dividends are a discretionary form of payment made by a company to its shareholders from the profits it earns during the year.
These dividends act as a source of passive income that serves to boost your active income and can be viewed as a welcome “supplement” to any bonuses that you receive.
The beauty of dividends lies in their flexibility.
You can either save these dividends for a rainy day, reinvest them in the same shares so that they can compound, or use them for a beautiful holiday with your family.
Using your dividends to create experiences can lead to cherished memories.
After all, the joy of a well-spent holiday can last a lifetime.
Collecting dividends throughout the year
Of course, dividends do not just accrue close to the end of the year.
Companies normally pay them twice a year while others may only do so once a year.
Several companies are even better as they dish out dividends every quarter.
Some examples include Singapore’s largest bank, DBS Group (SGX: D05), Singapore Exchange Limited (SGX: S68), and iFAST Corporation (SGX: AIY).
The REIT sector is also a popular choice for dividend lovers.
REITs such as Mapletree Logistics Trust (SGX: M44U) and Mapletree Industrial Trust (SGX: ME8U) pay out dividends every three months.
Other popular REITs such as Parkway Life REIT (SGX: C2PU), Frasers Centrepoint Trust (SFX: J69U), and CapitaLand Integrated Commercial Trust (SGX: C38U) pay distributions every six months.
By steadily accumulating these payouts, you can fund dream vacations—whether it’s a serene cruise or a Nordic adventure in Sweden or Switzerland.
The benefits of dividends
What’s so attractive about dividends, you may wonder?
For one, they are not taxable in the hands of the shareholder.
This is unlike active income such as salary and bonuses which are subject to personal income tax.
Second, they can rise over time if invested in a growing company.
This rise can probably beat any salary increment that you may receive as part of your job.
For instance, iFAST recently upped its third quarter of 2024 interim dividend by 15% year on year to S$0.015 while DBS’s interim dividend jumped 22.7% year on year to S$0.54 per share.
How often can you enjoy a 15% to 20% increase in your base salary?
The best thing about dividends, though, is that they are passive by nature.
Rather than working hard for your money, you are letting your money work hard for you.
Start building an income portfolio
By building an income-generating portfolio, you’re not just preparing for a better financial future; you’re creating opportunities to enjoy life today.
So, as we kick off 2025, think about how you can put dividends to work for you.
Whether it’s funding a memorable holiday, reinvesting for future growth, or simply enjoying the peace of mind that comes with passive income, the choice is yours.
Let this be the year you take that first step toward financial independence—one dividend at a time.
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Disclosure: Royston Yang owns shares of iFAST Corporation, DBS Group, Singapore Exchange, and Mapletree Industrial Trust.
