Do you want to earn more money?
For some, the way to earn more money is to work more. Yet, Singapore seems to rank high on the list of countries where workers chalk up unpaid overtime.
According to a 2023 survey, four out of 10 employees claimed that they clocked up 10 additional hours of unpaid overtime every week.
And with Singapore planning to raise the country’s retirement age to 65 and re-employment age to 70 by 2030, it may seem like there is no way out of the rat race.
A better way
What if I told you that there is a way to work less, yet earn more?
No way you may say. There is no such thing as free money.
You’re right. There isn’t.
But there are ways a hardworking investor can set himself or herself up for a steady, even increasing stream of passive income.
One simple way is: Dividends.
The concept is simple. But it’s all in the execution.
Dividends are a type of passive income you receive from owning shares of a dividend-paying stock.
For instance, REITs such as Mapletree Industrial Trust (SGX: ME8U) pay distributions quarterly, meaning that you receive cash straight into your bank account every three months.
What’s more, you do not need to work to “earn” this dividend – it’s the result of making your money work on your behalf.
Hunting for dividend stocks
Not all listed stocks are reliable dividend payers.
For starters, search for stocks with a long track record of rewarding shareholders with dividends.
You can also seek businesses that have steadily raised their dividend over time, thus putting more cash into your pocket.
A dependable dividend payer should possess a strong economic moat and demonstrate a long track record of paying out dividends.
A strong economic moat protects the firm’s profits, and therefore, allows it to share the spoils with shareholders.
Blue-chip names such as Singapore Exchange Limited (SGX: S68), and DBS Group (SGX: D05) come to mind.
SGX is Singapore’s sole bourse operator and has been diligently paying out a dividend since 2003.
The company’ most recent first half of fiscal 2024 saw a total of S$0.17 per share paid out, taking the stock market operator’s annualised dividend of S$0.34, higher than the S$0.325 paid out a year ago.
Next, DBS is the largest bank in Singapore and recently reported a record set of earnings for the first quarter of 2024 (1Q’24).
A quarterly dividend of S$0.54 was paid out, representing a 42% year on year increase over the previous year’s S$0.38.
Here’s the surprise, 1Q’23’s dividend of S$0.38 itself was a 15% year-on-year increase from S$0.33 paid in 1Q’22.
Hence, there is a near-64% increase in dividend payouts since 1Q’22.
This is an increase that is unlikely to happen to your salary in two years.
In fact, there are times when dividend investing can pay a nice bonus in the form of capital appreciation too.
In the case of DBS, it has seen its share price rise from around $24.39 to $35.81 in the last five years*.
Increasing your flow of dividends
Once you pick out these dividend stalwarts, the next thing to do is to slowly accumulate more shares of such businesses.
By reinvesting your dividends and compounding, you can gradually build up a formidable source of passive income.
It’s like planting more trees so that they produce more fruits in the future.
Over time, as your stake in these companies grows, the dividends you receive will also increase in tandem.
This flow of dividends will supplement your earned income.
Depending on how much you invest and reinvest, this stream of income may even grow big enough to completely replace your earned income.
That’s salary independence.
Get Smart: Living life on your own terms
Your financial goal might not be salary independence.
It could be an extra income to pay for your child’s enrichment classes. Or it could be extra cash to splurge on a holiday abroad. Or just cash set aside for a rainy day.
Whatever your financial goal is, we are here to help.
Boost your portfolio’s returns with 5 SGX stocks that promise both stability and steady growth. We bring you the names of these rock-solid stocks, including why they could drive massive dividends over the next few years. If you’re looking to invest for retirement, this guide is a must-read. Click HERE to download now.
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*Note: DBS share price data as of 9 June 2019 and 9 June 2024
Disclosure: Royston Yang owns shares of Mapletree Industrial Trust, DBS Group and SGX.
