If you are building a retirement portfolio, it is easy to get drawn to the stocks with the fattest yields.
But yield alone can be deceiving.
A stock paying 8% is no good if the business cannot afford to keep writing those cheques.
What should you look for instead?
Two things: free cash flow and a net cash balance sheet.
Free cash flow tells you whether a company is generating enough cash after reinvesting in its business to pay you.
And a net cash position means the company is not leaning on borrowed money to fund its operations.
Here are three small-cap SGX stocks that pass both tests.
VICOM (SGX: WJP)
VICOM is a testing and inspection services provider in Singapore and a subsidiary of ComfortDelGro Corporation (SGX: C52).
The company had a cracking start to 2026.
Revenue grew 11.5% year on year (YoY) to S$37.2 million, and net profit surged 33.6% to S$10.0 million.
The standout number? Operating profit margin, which widened to 32.4% from 27.0% a year ago.
That kind of margin expansion tells you the business has real operating leverage – as revenue grows, a bigger slice drops to the bottom line.
VICOM held S$59.9 million in cash with zero debt as at 31 March 2026.
Free cash flow did come in lower at S$2.2 million versus S$4.5 million a year ago, but dig a little deeper and the reason is clear: capital expenditure of S$11.6 million went towards developing the Jalan Papan integrated testing centre.
That is money spent on future earnings capacity, not plugging holes.
One area to watch: management flagged that ERP 2.0 OBU installations are winding down as most have been completed, whilst Oil & Gas testing demand was temporarily affected by the Middle East conflict.
Micro-Mechanics (SGX: 5DD)
Micro-Mechanics designs and manufactures consumable tools and parts used in semiconductor processing – a niche but essential corner of the chip supply chain.
For 3QFY2026 (the quarter ended 31 March 2026), revenue rose 16.2% YoY to S$18.6 million.
Net profit climbed 18.8% to S$3.8 million.
The heavy lifting came from the Consumable Tools segment, where sales jumped 20.9% YoY to S$14.4 million on the back of strong demand from AI, computing, and memory applications.
Gross margin ticked up to 51.6% from 50.5% a year ago – a sign that the company is not just growing its top line, but doing so profitably.
On the balance sheet, the group held S$25.7 million in cash against no borrowings.
Free cash flow was S$2.8 million, down from S$3.6 million a year ago as higher working capital needs ate into operating cash flow.
The tailwinds here are real.
The World Semiconductor Trade Statistics (WSTS) organisation is forecasting global semiconductor sales to grow 25% to nearly US$1 trillion in 2026.
But retirement income investors should remember that semiconductor demand runs in cycles.
The AI-driven wave may prove more durable than past cycles, but that remains to be seen.
Delfi (SGX: P34)
Delfi manufactures and distributes chocolate confectionery products across 17 markets.
Its flagship brands – SilverQueen, Ceres, and Delfi – are household names in Indonesia.
The group’s 1Q2026 numbers were a mixed bag.
Net sales rose 6.2% YoY to US$159.1 million, with Own Brands leading the charge at 19.6% year on year growth.
Regional Markets sales also climbed 13.3% YoY to US$57.2 million.
Agency Brands dipped, but this was due to the planned termination of an agency account in 3Q2025 – strip that out, and the segment would have grown 30.4% YoY.
Delfi holds the strongest cash position of the three: US$93.8 million in cash against US$16.9 million in borrowings, giving it a net cash position of US$76.9 million.
Free cash flow was US$24.9 million, healthy but down from US$34.4 million a year ago.
Here is the catch.
Gross profit margin fell 140 basis points YoY to 26.6%, squeezed by the weaker Indonesian Rupiah and higher cocoa costs from earlier forward contracts.
For FY2025, Delfi declared a total dividend of S$0.0343 per share.
Whether the group can maintain or grow that payout hinges on its pricing power – can it pass rising costs through to consumers without losing market share?
That is the question retirement income investors should keep front of mind.
Get Smart: What retirement income investors should look for
Free cash flow and a clean balance sheet do not guarantee dividends forever.
But they give a company the financial room to keep paying even when conditions get tough.
All three stocks here pass that test.
The real work is watching what comes next – cyclical swings in semiconductors, cocoa cost headwinds, or a one-off project winding down.
Know the risks, and you can hold with conviction.
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Disclosure: Calvina L. does not own shares of any companies mentioned. Chin Hui Leong contributed to the article and owns shares of VICOM, Micro-Mechanics and Delfi.
