The recent Budget 2025 was special as Singapore celebrates its 60th anniversary since its independence in 1965.
Dubbed “SG60”, the Budget came with a slew of goodies such as CDC Vouchers and tax rebates to help Singaporeans manage higher costs caused by inflation.
However, a poll conducted after the Budget was announced found that most respondents felt that not enough was being done to help them cope with the rising cost of living.
There is a better method to prepare yourself for these higher costs and also ease yourself into a comfortable retirement.
Yes, I am talking about investing in dividend-paying stocks.
My colleague and Smart Investor co-founder David Kuo has a simple requirement for the stocks within his portfolio.
All of them must pay a dividend.
This requirement may sound simple, but it is far from easy.
You need to assess the underlying business to determine if it can consistently pay a dividend.
But once you cobble together a portfolio of such stocks, they can easily supply you with dividends that help to augment your earned income and pave the way for a comfortable retirement.
REITs provide dependable dividends
For starters, the REIT sector offers steady dividends as this asset class is mandated to pay out at least 90% of its earnings to enjoy tax incentives.
Some examples of blue-chip REITs include CapitaLand Integrated Commercial Trust (SGX: C38U), or CICT, and Mapletree Industrial Trust (SGX: ME8U), or MIT.
CICT recently reported a robust set of earnings with its distribution per unit (DPU) for 2024 rising by 1.2% year on year to S$0.1088.
At a unit price of S$1.98, shares of the retail and commercial REIT offer a trailing distribution yield of 5.5%
MIT also did well as the industrial REIT reported a 1.5% year-on-year increase in its DPU to S$0.0341 for the third quarter of fiscal 2025. This takes its trailing 12-month DPU to S$0.1357.
At S$2.00, shares of MIT offer a trailing 12-month distribution yield of 6.8%.
The above are just two examples of REITs that pay out regular, reliable distributions that you can count on for passive income.
Their yields are also higher than the long-term inflation rate of between 3% to 4%, thus helping you to keep pace with inflation.
Scouring the world for dividend stocks
Of course, REITs are just one source of dividends.
David likes to scour the world for solid businesses that also dish out dividends.
This diversification allows him to own a wide variety of growing businesses in various parts of the world.
Some of these businesses are undergoing strategic reviews that help to unlock value, thus providing shareholders with not just capital gains, but also higher dividends.
A good example is Hongkong Land (SGX: H78), or HKL.
The owner of prime luxury retail properties in Singapore, Hong Kong, and China announced a strategic review late last year.
The group intends to double its underlying profit before interest and tax by 2035 while also doubling its dividend per share.
Get Smart: Compounding your dividends
These stocks are just some of the businesses that David likes.
In fact, he owns an entire portfolio of dividend-paying stocks that have been churning out steady and growing dividends over the years.
The beauty of a dividend investment strategy is that you can compound your dividends to accelerate the growth of your portfolio and further increase your dividend flow.
Compounding involves reinvesting the dividends you receive into the very same stocks that paid these dividends.
Over time, as your stake in these companies increases, you can also enjoy higher dividends as your portfolio grows to hit new highs.
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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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.
