3 Blue Chip Stocks to Help You Coast Through a Downturn

·4-min read
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It’s natural to feel worried when you read negative news headlines.

The highest core inflation in 13 years, coupled with rising interest rates, will have a dampening effect on the economy.

A recession may even hit our shores in the next two years, warns Prime Minister Lee Hsien Loong.

But don’t go out and sell all your shares in a panic.

By owning strong blue-chip companies, you can ensure your portfolio can sail through a downturn relatively unscathed.

Share prices may dip in the short term but if the business is resilient, shares will go on to do well over the long run.

Here are three blue-chip stocks that will allow you to enjoy peace of mind should a slowdown occur.

Singapore Technologies Engineering Limited (SGX: S63)

Singapore Technologies Engineering Limited, or STE, is a technology and engineering group with business divisions dealing with aerospace, smart city, defence, and public security.

STE was listed back in 1997 and has a track record of paying out dividends without fail since then.

The conglomerate offers a good mix of yield, stability and growth, being 51.7%-owned by investment firm Temasek Holdings.

For its fiscal 2022 first quarter (1Q2022) business update, group revenue rose 13% year on year to S$2 billion.

All three of STE’s divisions enjoyed year on year revenue increases, with commercial aerospace leading the way with a 22% year on year jump.

With the reopening of borders and the continued recovery in the aviation and aerospace sectors, this division should see better prospects ahead.

The group’s urban and satcom (satellite communication) division also saw a 12% year on year revenue uplift with the delivery of more smart city projects.

With the completion of the acquisition of TransCore in March, this division should enjoy stronger growth.

In total, STE snagged S$2.4 billion of new contracts for 1Q2022, bringing its order book to a new high of S$21.3 billion.

The board had also approved a quarterly interim dividend of S$0.04 per share, bringing the full-year annualised dividend to S$0.16.

At the last traded price of S$3.90, STE’s shares are offering a forward dividend yield of 4.1%.

ComfortDelGro Corporation Limited (SGX: C52)

ComfortDelGro Corporation Limited, or CDG, is a land transport conglomerate with a total fleet size of around 35,000 buses, taxis and rental vehicles.

The group operates in seven countries – Singapore, Malaysia, China, Ireland, New Zealand, the UK, and Australia.

CDG is seeing better business conditions as more countries are treating the COVID-19 virus as endemic.

As a result, borders are opening up and more people are up and about.

As economic and social activities pick up, CDG should see ridership on its vehicles improve accordingly.

Revenue for 1Q2022 inched up 3.9% year on year to S$895.9 million while operating profit jumped by 26% year on year to S$107.2 million.

Net profit improved by 30.4% year on year to S$76.7 million.

CDG continues to build its presence in Australia.

Earlier this month, it won the tender for a six-year contract to be the sole operator of public transport services in the Northern Territory.

Singapore Exchange Limited (SGX: S68)

Singapore Exchange Limited, or SGX, is Singapore’s sole stock exchange operator.

SGX is another stock that has paid out dividends for more than two decades, with its latest fiscal 2021 dividend at S$0.32 per share.

At a share price of S$9.40, the group’s trailing dividend yield stands at 3.4%.

The bourse operator reported healthy operating statistics for May 2022.

Derivatives’ average daily volume (ADV) increased by 19% year on year, led by the world’s most liquid international contract for Chinese equities, the SGX FTSE China A50 Index Futures.

Securities ADV also rose 18% month on month to S$1.51 billion, while market turnover increased by 12% over the same period to S$28.6 billion.

Last month also saw the secondary listing of NIO Inc (NYSE: NIO) (SGX: NIO), a leading company in the electric vehicle market, that saw an average daily turnover surge to S$2.3 million.

SGX believes in diversifying its revenue sources by becoming a successful multi-asset exchange and has listed three special purpose acquisition companies, or SPACs.

In the longer term, the group hopes to latch on to the themes of ESG and ETFs to expand its business further, as communicated during its Analyst Day briefing last year.

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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited.

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