The Central Provident Fund (CPF) scheme was set up to help Singaporeans to build up their savings for retirement.
The Ordinary Account (OA) pays out an almost risk-free interest rate of 2.5%, with an additional 1% paid out for the first S$20,000.
Aside from acting as a source of retirement funds, the CPF OA can also be used for housing and education.
What’s more, the government has also introduced the CPF Investment Scheme (CPFIS) which provides members with the option to invest their CPF savings in various financial products.
Some of these include equities, insurance products, unit trusts, and bonds.
The CPFIS allows members to grow their CPF above the risk-free rate, but you need to be aware of these three factors before you start investing your CPF funds.
If you plan to grow your CPF at a faster clip, here are three stocks you can consider buying with the CPFIS.
The Hour Glass (SGX: AGS)
The Hour Glass, or THG, is a specialist watch retailer with 50 boutiques located in 12 cities around the Asia-Pacific region.
The group carries a wide selection of timepieces with high-end brands such as Rolex, Patek Philippe, Omega, Cartier, and IWC.
THG has reported a strong recovery in luxury watch sales as the pandemic subsides.
For its fiscal 2022 first half (1H2022) ended 30 September 2021, revenue surged by 63% year on year to S$477.4 million.
Net profit more than doubled year on year to S$62.6 million.
Free cash flow jumped 53.8% year on year to S$78.6 million.
The group paid out an interim dividend of S$0.02 per share, unchanged from a year ago.
THG’s trailing 12-month dividend stands at S$0.06, giving its shares a historical dividend yield of 2.6%.
Luxury watch demand is on the rise as travel has been curtailed over the last two years due to the pandemic.
Owning luxury watches is the new rage among the young, who own the watches because there is a second-hand market where they can sell them at a profit.
More young people are also interested in watches due to social media.
The recent launch of the Swatch (SWX: UHR) cum Omega collection drew huge crowds not just in Singapore, but also in Japan, Australia, and the US.
These observations indicate that there is strong and sustained demand for luxury watches and THG is in a good position to capitalise on this trend.
Singapore Technologies Engineering Ltd (SGX: S63)
Singapore Technologies Engineering Ltd, or STE, is a global technology, defence and engineering group.
The blue-chip engineering conglomerate has diverse businesses in the aerospace, smart city, and public security segments and serves customers in more than 100 countries.
STE reported a strong set of earnings for fiscal 2021 (FY2021), with revenue rising 7.5% year on year to S$7.7 billion.
Operating profit climbed by 13.3% year on year while net profit improved by 9.3% year on year to S$570.5 million.
An FY2021 dividend of S$0.15 was paid out, giving its shares a trailing dividend yield of 3.6%.
There are hints that the group’s growth can continue into FY2022 and beyond.
STE announced that its order book stood at S$19.3 billion as of 31 December 2021, a three-year high.
The group had also acquired TransCore, a market leader in electronic toll collection solutions and a provider of intelligent transportation systems, for US$2.7 billion.
The purchase will advance STE’s smart city ambition, putting it on track to double its smart city revenue by 2026.
DBS Group (SGX: D05)
DBS Group should be no stranger to investors, being Singapore’s largest bank.
The group has demonstrated not just its resilience throughout the pandemic but has also smartly navigated through the challenges to post a record S$6.8 billion in net profit for FY2021.
The bank had also upped its quarterly dividend to S$0.36 from S$0.32 in the previous quarter, signalling that its business looks set to improve.
Annualised dividend stands at S$1.44, giving the lender’s shares a forward dividend yield of 4.1%.
Investors can expect more growth from DBS.
Rising interest rates should benefit the bank’s net interest margin and help to lift net interest income (NII).
For every 0.01% increase in USD rates, the bank stands to enjoy an uplift of between S$18 million to S$20 million in NII.
DBS has other initiatives up its sleeve that will add around S$1.2 billion to its revenue and S$500 million to its net profit.
One of these was the recent acquisition of Citigroup’s (NYSE: C) Taiwan consumer banking division.
DBS also has other growth areas such as its digital exchange, its China securities joint venture, and a carbon credits marketplace Climate Impact X.
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Disclaimer: Royston Yang owns shares of DBS Group.