The Straits Times Index (SGX: ^STI) is home to 30 of the largest companies in Singapore.
As such, the index is widely regarded as the market barometer for the Singapore stock market.
While there are 30 companies in total, the largest among the STI components hold more sway in the index compared to others.
Let’s take a look at which are the 10 biggest blue chips.
|Company||Ticker Symbol||Industrial Classification Benchmark
|DBS Group Holdings||D05||Banks||15.3%|
|Oversea-Chinese Banking Corporation||O39||Banks||12.4%|
|United Overseas Bank||U11||Banks||10.5%|
|Singapore Telecommunications||Z74||Mobile Telecommunications||6.8%|
|Jardine Matheson Holdings||J36||Diversified Industrials||4.9%|
|Ascendas REIT||A17U||Industrial and Office REITs||4.1%|
|Wilmar International Limited||F34||Food products||4.0%|
|Singapore Exchange||S68||Investment Services||3.2%|
|CapitaLand||C31||Real Estate Holding and Development||2.9%|
|Keppel Corporation||BN4||Oil Equipment and Services||3.5%|
Source: FTSE ST Index Series factsheet, as of 30 September 2020
As it stands, the top 10 companies within the Singapore index account for two-thirds of the index’s weightage, as shown in the table below.
In fact, Singapore’s three major banks, DBS Group Holdings Ltd (SGX: D05), Oversea-Chinese Banking Corp. Limited (SGX: O39), and United Overseas Bank Ltd (SGX: U11), account for a whopping 38.2% of the STI.
If you add the next two largest companies, namely Singapore Telecommunications Limited (SGX: Z74) and Jardine Matheson Holdings (SGX: J36), the top five companies would account for half of the index’s weight.
Blue chips, defined
Due to their size, STI component stocks are often referred to as blue chips.
Blue-chip companies are generally defined as large, well-capitalised companies with a long operating track record and a distinctive brand name.
These businesses are usually market leaders in their respective industries and have a dominant competitive edge over smaller competitors.
By buying into blue-chip companies, the implication is that you should be able to sleep well as they are supposed to offer stability and certainty.
Yet, recent events have shown that bigger is not necessarily better.
Dividends in crisis
The COVID-19 pandemic has exposed the weaknesses of some of these well-regarded companies.
For instance, shares of Singtel sank to a 12-year low in September amid lower revenue and profits reported in its latest quarter. The plunge follows the telco’s decision to cut its final dividend from S$0.107 to S$0.0545 back in May.
Likewise, our three local banks have lowered their dividends after being called on by the Monetary Authority Singapore (MAS) to cap their dividend payments for this year at a maximum of 60% of fiscal 2019’s total dividend per share.
In a study we recently conducted, we have found that two out of every three dividend-paying blue chips have since lowered their dividends.
It’s not all doom and gloom. At the same time, we have also found four blue chips that have managed to increase their dividends amid all the dividend gloom.
Want to find out more about the results of our study and the four winning dividend blue chips?
Join us for an exclusive Telegram Q&A on 6 November 2020 at 12 noon where we’ll discuss dividend blue chips that have been winning in 2020… plus special coverage on one of Singapore’s hottest stocks! Details will be shared on our Telegram channel, so CLICK HERE to join our channel.
Disclosure: Chin Hui Leong owns shares in DBS Group, OCBC, UOB, and Singapore Exchange.