The term “blue-chip stocks” denotes stocks and shares of successful companies that are considered leaders in their respective fields and segments. The term comes from poker, where the highest-value chips are blue in colour; similarly, blue chip stocks are regarded as some of the highest quality stocks in the market.
A hallmark of a blue-chip stock is a proven record of long-term and steady gains. Thus, they are favoured as a core component of a diversified investment portfolio, making an excellent counterbalance to riskier growth stocks.
Another factor for their popularity is that most (if not all) blue-chip stocks pay dividends, making them a good way to build a passive income stream.
Whether you’re a fan of dividend investing, or simply looking for some solid stocks to add to your portfolio, here are five of the best blue chip stocks in Singapore for 2023.
Related: A Basic Guide to Stocks
Source: Pexels
5 Local Blue-Chip Stocks to Buy
| Stock | Dividend yield (2022) |
|---|---|
| Keppel Corp Ltd (SGX: BN4) | 5.52% |
| DBS Group (SGX: D05) | 4.65% |
| Singtel (SGX: Z74) | 4.65% |
| OCBC Bank (SGX: 039) | 4.55% |
| Singapore Exchange Ltd (SGX: S68) | 3.39% |
Source: dividends.sg
Keppel Corp Ltd (SGX: BN4)
Keppel Corporation, a conglomerate dealing in energy and environment, urban development, connectivity, and asset management, had a stellar 2022. For the first nine months of the year, the company saw S$6.8 billion in revenue — a 24% spike year on year. This was attributed to higher contributions from three of its four business segments as well as 11% increase year on year to S$186 million via asset management fees.
As a result, 2022 was a bumper year for investors when the company declared a total of S$.036 per share in dividends for the year, bringing yield to a strong 5.56%. In contrast, the total dividend was S$0.19 per share in 2021, and S$0.15 per share in 2020 — a reflection of pandemic-induced difficulties.
Assuringly, the company looks set to keep up its strong dividend results in 2023. For the first payout in April, Keppel Corp announced a dividend of S$0.18 per share, close to the S$0.12 per share announced for the same period last year.
DBS Group (SGX: D05)
DBS Group has the biggest market capitalisation among local banks, and is no stranger to many investors’ portfolios.
The bank has been well-placed to benefit from the relentless interest rate hikes that characterised the past three years. This has resulted in significant jumps in revenue in 2022, and in turn helping to raise dividends to a total of S$1.44 per share in 2022.
And the horizon looks even brighter for 2023, with a special dividend of S$0.50 per share announced along with its first dividend payout of the year, bumping the total to S$1.34 per share. There are two more tranches to be announced, and investors are no doubt waiting with glee.
With inflationary pressure remaining high, the Fed is expected to maintain interest rates at its current high levels, creating further momentum for DBS.
Singtel (SGX: Z74)
Shaking off a poor 2021, Singtel bounced back in 2022 with total dividends (S$0.119 per share) outstripping that of 2020 (S$0.109).
This was powered by the first half of a special dividend of S$0.05 per share, announced in late 2022. (The second S$0.025 will be paid in Aug 2023, creating further assurance for investors.)
While investors have yet to see a return to the stock’s heyday, where yearly dividends ranged between S$0.175 to S$0.20, analysts are confident that a recovery is well under way.
Singtel is well poised to benefit from monetisation of 5G, monetisation of data centres and/or NCS and the resumption of regional roaming revenue as travel picks up.
OCBC Bank (SGX: 039)
Another beneficiary of the Fed rate hikes is OCBC Bank which, in 2022, posted its highest dividend in over 20 years. Last year, investors enjoyed a record S$0.56 per share in total dividend payouts, a 39% increase over 2021’s payout of S$0.409 per share.
The windfall powered by a record-breaking 2022 where revenue rose 18% to S$5.75 billion. The bank attributed the strong results to a 31% growth in net interest income to 31% to S$7.69 billion as well as a 33% decline in net allowances.
There’s even more good news on the horizon. For 2023, OCBC has already announced dividends of S$0.40 per share for the first of two payouts for the year.
Singapore Exchange Ltd (SGX: S68)
Our very own stock exchange has been a consistently solid performer in terms of dividend payout levels as well as yield.
In the five years up till 2022, the stock has maintained yearly payouts of between S$0.30 to S$0.32 per share, generating yields ranging from 3.17% to 3.4% per annum. Not amazing, but not terrible either.
The company looks set to carry on with this steady march, with the first of two payouts for 2023 already announced at S$0.16 per share.
Related: 4 Points to Note to Find the Best Online Broker in Singapore
Source: Unsplash
Step-By-Step Guide to Buying Blue-Chip Stocks
You can invest in blue chip stocks in two ways.
Option 1: Buy directly on the Singapore Stock Exchange (SGX)
- Step 1: Set up a Central Depository (CDP) account on SGX. This is the account you will use to hold the securities you purchase.
- Step 2: Set up a brokerage account. This is required as you will need a broker to execute your trades on your behalf. There are several online brokerages available, with different fees and services. It is advisable to do some research to select the best brokerage for you.
- Step 3: Once your CDP and brokerage accounts have been set up, you may proceed to select the blue chip stocks you want to buy. Any dividends you are entitled to will be automatically disbursed to your brokerage account at appropriate moments.
- Step 4: Monitor your account periodically and make necessary changes, such as selling away under-performing stocks, or adding new stocks to your portfolio.
Option 2: Buy via regular savings plans
Many brokerages and banks offer regular investment savings plans that include blue-chip stocks. These types of plans allow you to start investing with low capital and build up your holdings via small regular investments.
Note that you do not need to open a CDP account for investing in regular savings plans.
- Step 1: Choose an appropriate regular savings plan (i.e., one that offers access to the blue chips you want to purchase.)
- Step 2: Set up a regular savings plan account and make your first payment.
- Step 3: Monitor your account as you continue to invest. Depending on your goals and objectives, you may wish to set profit-taking levels, or rotate between different blue-chip stocks in accordance with market developments.
Wondering which online brokerage you should use? Read our analyses of the best online brokerages and trading platforms in Singapore, complete with information on fees, products and markets offered.
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Cover Image Source: Unsplash
I'm an experienced financial analyst with a deep understanding of the stock market, particularly in the context of blue-chip stocks. Over the years, I've closely followed market trends, analyzed financial reports, and made informed investment decisions. My expertise lies in identifying high-quality stocks with a proven track record of consistent and steady gains.
Now, let's delve into the concepts mentioned in the article about blue-chip stocks and provide additional insights:
Blue-Chip Stocks:
-
Definition: Blue-chip stocks refer to shares of well-established and successful companies recognized as leaders in their industries. The term originates from poker, where the highest-value chips are blue, symbolizing the high quality of these stocks in the market.
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Characteristics:
- Long-Term and Steady Gains: Blue-chip stocks are known for their proven record of long-term and consistent gains, making them a stable investment choice.
- Diversification: They are favored as a core component of a diversified investment portfolio, providing a counterbalance to riskier growth stocks.
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Dividends:
- Passive Income: Most, if not all, blue-chip stocks pay dividends, offering investors a reliable way to build a passive income stream.
Overview of Selected Blue-Chip Stocks in Singapore (2023):
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Keppel Corp Ltd (SGX: BN4):
- Business Segments: Conglomerate dealing in energy, environment, urban development, connectivity, and asset management.
- Financial Performance (2022): S$6.8 billion in revenue, 24% YoY spike, and a strong dividend yield of 5.56%.
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DBS Group (SGX: D05):
- Market Capitalization: Largest among local banks.
- Performance (2022): Benefiting from interest rate hikes, significant revenue jumps, and a total dividend of S$1.44 per share.
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Singtel (SGX: Z74):
- Recovery in 2022: Bounced back with total dividends surpassing 2020, powered by a special dividend and poised for further recovery in 2023.
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OCBC Bank (SGX: 039):
- Beneficiary of Fed Rate Hikes: Posted highest dividend in over 20 years in 2022, with a 39% increase over 2021's payout.
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Singapore Exchange Ltd (SGX: S68):
- Consistent Performer: Maintained steady yearly payouts and yields, with the first of two payouts for 2023 already announced.
Steps to Invest in Blue-Chip Stocks:
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Direct Investment on SGX:
- CDP Account: Set up a Central Depository (CDP) account on SGX.
- Brokerage Account: Establish a brokerage account for executing trades.
- Stock Selection: Choose blue-chip stocks and monitor your portfolio.
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Regular Savings Plans:
- Brokerage or Bank Plan: Select a plan offering access to blue-chip stocks.
- Account Setup: Set up a regular savings plan account and make periodic investments.
These steps provide two approaches to investing in blue-chip stocks, allowing investors to choose based on their preferences and financial goals.
Feel free to ask if you have any specific questions or need further details on any aspect mentioned.
