In times of intense uncertainty, investors turn to reliable businesses. So far in 2022, that’s been no exception.
As US stocks have been hit by rising interest rates and higher inflation, Singapore stocks have actually done relatively well.
In times of crisis, there are opportunities to invest more for our future retirement. That’s the main purpose of Singapore’s Supplementary Retirement Scheme (SRS) programme.
For Singapore citizens and PRs, annual contributions up to S$15,300 are eligible for income tax relief. Meanwhile, for foreigners, the same annual contribution limit is S$35,700.
Overall, the SRS is exactly what it says on the tin; supplementary. It serves more in the capacity of a “nice to have” addition to your Central Provident Fund (CPF) and CPF-Investment Scheme (CPFIS).
So, for those of us who have extra funds to deploy, these are three great stock ideas for your SRS account.
1. Ascott Residence Trust
If we’re putting away money for retirement, we want to be invested in reliable stocks. One such area we can find that in is in property, particularly a name like Ascott Residence Trust (SGX: HMN).
It’s one of the largest hospitality trusts in Asia with a comprehensive portfolio spanning hotels, serviced residences, and – more recently – student accommodation.
Ascott saw its first-half 2022 revenue soar by 45% year-on-year to S$267.4 million as 12 new properties contributed to stronger performance.
Similarly, gross profit rose 44% year-on-year in H1 2022 to S$118.2 million.
However, even excluding the contributions of the 12 new properties (and three divested properties), same-store revenue and gross profit were 32% and 28% higher year-on-year, respectively.
That’s testmanent to the strength of Ascott’s existing portfolio. Ascott now has 95 properties in 44 cities across 15 countries globally.
Management estimates that around 68% of its first-half 2022 gross profit came from stable income sources, including master leases, rental housing, and student accommodation.
With a dividend per share (DPS) that grew 14% year-on-year in H1 2022 to 2.33 Singapore cents, Ascott Residence Trust shares now offer a 12-month forward dividend yield of 4.3%.
2. NetLink NBN Trust
Second on the SRS stock list is fibre network infrastructure provider NetLink NBN Trust (SGX: CJLU). Again, the company provides absolutely critical services for both households and businesses in Singapore.
That’s because NetLink Trust designs, builds, and operates the passive fibre network infrastructure for Singapore’s Next Generation Nationwide Broadband Network (NBN).
All this means that its business model is highly predictable and recurring, with over 80% of its revenue based off long-term contracts or customer stability (see below).
Source: NetLink NBN Trust Q1 FY2023 business update
In fact, despite the high penetration of broadband in Singapore, the company saw net additions of 6,000 connections in its latest Q1 FY2023 (for the three months ending 30 June 2022) results.
Revenue for the period was up 4.8% year-on-year to S$97.9 million while EBITDA rose at a similar clip – up 5% year-on-year to S$73 million.
With net gearing of only 20.8% and a 12-month forward dividend yield of over 5%, NetLink Trust offers SRS investors a juicy option.
3. DBS Group
Finally, rounding out the list is the reliable banking stalwart DBS Group Holdings Ltd (SGX: D05). Singapore’s largest bank had a solid showing in its latest Q2 and H1 2022 earnings.
Net profit was up 7% year-on-year in the second quarter of this year to S$1.82 billion. Meanwhile, net interest income (NII) and net interest margin (NIM) both saw substantial increases during the quarter.
DBS’s NII was up 12% quarter-on-quarter to S$2.45 billion in Q2 2022 while its NIM also expanded, rising 12 basis points to 1.58%.
With the effect of interest rate rises being notoriously “laggy”, the full benefits of higher interest rates are still to come for DBS.
In addition, the bank has been a reliable grower of its dividend over time. Over the past 10 years, DBS has seen its dividend expand at a compound annual growth rate of 9.9%.
With a 12-month forward dividend yield of around 4.4%, DBS shares give long-term investors a passive income as well as exposure to growth.
Look for reliable businesses to fund retirement
Long-term investors should always have specific pots for their investments. One part of a portfolio might be dedicated to more growth stocks or riskier ideas.
However, for peoples’ retirement portfolios, we should aim to collect reliable businesses. That’s exactly what the SRS is there for.
We can accumulate great businesses that pay dividends, all while benefitting from the income tax relief along the way.
For SRS investors, Ascott Residence Trust, NetLink NBN Trust and DBS Group are three compelling stocks to own for the long haul.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares DBS Group Holdings Ltd.
