The school holidays are here.
As a parent, I wouldn’t mind having extra cash in my pocket to bring the family out for dinner or to travel overseas for a well-earned break.
Thankfully, May is one of the most generous months for dividends.
For instance, Oversea-Chinese Banking Corporation (SGX: O39), better known as OCBC, paid out S$0.40 per share in dividends around two weeks ago.
If you own 1,000 OCBC shares, you would have an extra S$400 in your hands just in time for the holidays.
Similarly, hospital operator Raffles Medical Group (SGX: BSL) or RMG rewarded patient shareholders with S$0.038 per share in dividends last week, up nearly 36% compared to a year ago.
In simple terms, for every S$10,000 of RMG stock you own, you will be richer by around S$293 in May.
These are just two examples of the many stocks paying dividends last month.
At our flagship service, the Smart Dividend Portfolio, our accumulated dividends collected from the start of the year till the end of May have exceeded S$1,400.
These dividends are accrued solely from Singapore stocks, and it’s cash in our pocket.
Now, that’s a good amount of cash to have on hand.
Whether you want to treat yourself to a meal or shopping while on holiday, you now have the cash.
Building from the ground up
Some believe that investing is hard work.
Sure, you have to put in some work but it’s not as hard as it sounds.
More importantly, the results are well worth the effort, in our view.
You see, the S$1,400 our portfolio received year to date was the result of the careful selection of Singapore stocks designed with a single purpose in mind: to provide a reliable source of income.
The better question is: how do you build a portfolio of stocks that pays dividends?
Answer: you start from the ground up, brick by brick.
Any good house begins with a strong foundation. And we do that using our proprietary model, the Smart Portfolio Builder.
We start with what we call Income Stocks, a reliable group of companies which pay dividends year in and year out.
This set of businesses may not be the flashiest out there.
But when it comes to handing out cash to shareholders, owning a selection of Income Stocks can provide you with the peace of mind that there will be a payout when the time comes.
For some of you out there, that’s all you need.
But if you are looking for some growth alongside reliability, that’s where the second layer comes in.
Built to grow
Next, we have another layer of stocks which we call Growth Stocks.
Like Income Stocks, Growth Stocks also pay a dividend.
But unlike Income Stocks, Growth Stocks prize growth alongside reliability.
RMG, a stock we mentioned earlier, comes to mind.
The stock does not have a high yield to offer.
However, as we have shown earlier, the dividend paid out has the potential to increase over time, rewarding shareholders with more cash for the same amount of shares owned.
Case in point: when The Smart Dividend Portfolio bought shares back in March 2022, the yield on offer was around 2.46%.
Fast forward a year later, and its yield, based on the price we paid, has risen to 3.3%.
The best part?
We didn’t have to do anything during this period.
RMG did all the heavy lifting, bringing in more revenue, generating more profits and therefore, being able to pay out higher dividends to patient shareholders who were willing to wait.
Built for the long term
At The Smart Dividend Portfolio, we are continuously searching for the best dividend stocks that can add to what we already have.
Occasionally, we will encounter new stock ideas which are interesting but come with some uncertainty.
These are candidates for the Speculative segment of our portfolio.
The trick here is to keep this portion of your portfolio small, much smaller than both your Income Stocks and Growth Stocks. The idea is to test these ideas but not go overboard in committing too much cash.
In time, if these businesses prove themselves, you may move them into the Growth or Income segment.
Get Smart: Build Your Own Cash-Generating Machine
If cash is king, then dividends are your best friend.
Yes, there is some work to do to build an everlasting investment portfolio.
But if you get it right, there is little you have to do after putting in the initial effort.
At The Smart Dividend Portfolio, we selected 26 stocks with the potential to serve a single purpose: to reliably pay out dividends, thereby rewarding patient investors.
We support the business like a sports fan, observe the management like a business owner and examine the dividend paid like a patient banker.
Investing in dividend stocks may seem daunting to some, but with the right approach, the results can be highly rewarding.
Not sure where to park your money in 2023? Give dividend stocks a try. You don’t need a lot of capital to start a stream of passive income. Our latest guide will show you how to invest and where to find the juicy dividends in SGX. Click here to download the report for FREE.
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Disclosure: Chin Hui Leong owns shares of Raffles Medical and OCBC.
