The excitement from receiving your first bonus after months or years of hard work is hard to describe.
After treating yourself to some good food and perhaps emptying your already-filled shopping carts from ages ago, you might ask yourself “What’s next?”.
Will you be placing the rest of your hard-earned bonus into your bank account?
Or will you consider growing your money through investing?
If I were you, I would definitely choose the latter because the bank pays out an average interest rate of just 0.65% per annum.
This level of return can’t even come close to beating the long-term inflation rate of around 2% to 3%.
Dividends can provide a great source of additional income if you’ve just started working.
Here are three dividend stocks that I think possess great potential for growing your wealth.
iFAST Corporation Ltd (SGX: AIY)
As a fast-growing financial technological (fintech) firm that offers a comprehensive range of investment products and services all in one place, iFAST has proven itself to be Singapore’s leading wealth management platform.
Fintech is one of the many technological megatrends that are driving consumer behaviour.
iFAST’s foothold and performance in various markets in South-East Asia is something to look out for as it possesses a strong clientele base and has a wide array of products and services.
In particular, net revenue for China’s operations grew a massive 186% year on year in the first quarter of 2021 (1Q2021), albeit from a low base.
Its strong free cash flow generation also underpins its ability to pay out consistent dividends to shareholders.
iFAST started 2021 with record assets under administration (AUA) of S$16.11 billion as of 31 March this year, an impressive 68.9% year on year growth.
Net profit for 1Q2021 soared, increasing by 142.5% compared to 1Q2020.
The fintech firm also saw its free cash flow (FCF) grow at an annual growth rate of 22% from 2013 to 2020.
The steady and consistent FCF ensures the company can pursue opportunities to enhance shareholder value such as increasing dividends, research and development, acquisitions and more.
The group had recently raised its trailing 12-month dividend to S$0.0355 from S$0.0315, up 12.7% year on year.
Hence, iFAST is a company you should not miss out on in this digital age.
Sheng Siong Group Ltd (SGX: OV8)
Many of you might have stepped foot in one of Sheng Siong’s supermarkets before.
Singapore’s third largest supermarket chain even airs its own television variety programme “The Sheng Siong” show.
Let me ask you a question.
Would you need to buy groceries and daily necessities despite being in a pandemic or recession?
The answer should be an obvious yes.
The nature of Sheng Siong’s business as a fast moving consumer goods (FMCG) retailer is attractive as it is recession proof.
Also, customer demand remains relatively the same even if there is an increase in the prices of their products.
Sheng Shiong’s sustainability journey (ESG) has also been carefully laid out and committed by its management.
The social aspect of its ESG policies is particularly strong within the company.
There was recent news of Sheng Siong staff receiving bonuses of up to 16 months inclusive of annual wage supplement last year.
Its policy of ensuring the wellbeing of staff is one that makes sense.
Such a strategy motivates employees to become more productive and aligns employees’ interests with that of management and shareholders.
The group has also churned out a splendid financial report card and displayed resilience.
Last year saw the retailer enjoy a significant boost in demand arising from the pandemic.
Though this effect has tapered off somewhat, Sheng Siong continued to report a 6.7% year on year increase in net profit for 1Q2021.
Shareholders are also in for a treat with a sharp increase in dividends to $0.065 in FY2020 from $0.0355 in FY2019
The resilience of the business, along with its free cash flow generation and generous dividends, are traits that stand out to investors.
Riverstone Holdings Limited (SGX: AP4)
Riverstone is a global manufacturer of nitrile healthcare and cleanroom gloves.
It also supplies other products such as finger cots and packing bags.
The group’s presence spans over six regions including South-East Asia (SEA), United States of America(USA) and Europe.
Like most pandemic-related products, COVID-19 has resulted in a surge in demand for medical supplies, resulting in extremely good performance for Riverstone in the last one and a half years.
However, Riverstone was already displaying steady growth long before the pandemic.
Revenue for the glove supplier increased at a compound annual growth rate of 15.3% from 2011 to 2019.
The group’s dividend payment has also increased in tandem.
Shareholders now enjoy RM 0.22 of dividends per share.
Moving forward, the group has acquired additional industrial land to expand its production capacity for cleanroom gloves.
Riverstone’s cash and cash equivalents have increased from RM648.9 million as of 31 December 2020 to RM1.1 billion as of 31 March this year.
A strong cash balance lowers the risks of investing in the company.
Excess cash can be used for reinvestment into capital equipment, which will yield a higher return for the group over time.
This cash can also be used to pay out more dividends to shareholders.
Thus, with the tailwinds mentioned, I believe Riverstone can continue to register strong growth in the long-run.
The group should be on your watchlist if you are looking for a dividend stock with growth attached to it.
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Disclaimer: Jia Yi owns shares of Sheng Siong Group Ltd and Riverstone Holdings Limited.