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These 4 Singapore Blue-Chip Stocks Offer Safe Harbour During a Recession

SGX
SGX

The last several months have seen passenger numbers surge as countries reopen their borders and air travel resume once again.

Pent-up demand for holidays has made people open their wallets in a big way, with air ticket prices surging by 25% in the past year.

However, rampant inflation may dampen consumer spending, with Singapore’s core inflation rising to 5.1% for August, close to a 14-year high.

The prospect of higher interest rates is also a negative for businesses as they hold back on capital spending.

The spectre of a recession looms close due to the mix of lower consumer demand, surging interest costs, and high inflation.

Investors need not worry, though.

You can find safe harbour in reputable blue-chip stocks that have weathered many a storm.

Here are four that should provide you with peace of mind and a decent dividend yield as you hunker down for the upcoming storm.

Singapore Exchange Limited (SGX: S68)

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

The bourse operator has demonstrated remarkable resilience in the past two years.

Its recent fiscal 2022 (FY2022) earnings ending 30 June 2022 saw the group report record revenue of S$1.1 billion, up 4% year on year.

Net profit inched up 1% year on year to S$451 million.

SGX paid out a dividend of S$0.32 for FY2022, unchanged from a year ago.

The bourse operator’s shares offer a historical dividend yield of 3.4%.

The group intends to tap on its over-the-counter foreign exchange platform to grow its top line, targeting an average daily volume of US$100 billion in the near term, up from the current US$70.6 billion.

Keppel DC REIT (SGX: AJBU)

Keppel DC REIT is a data centre REIT with a portfolio of 21 data centres across nine countries worth S$3.5 billion as of 30 June 2022.

Data centre growth should be sustained by strong global demand for data storage.

Research firm Gartner projects that worldwide end-user spending on public cloud services will grow to nearly US$600 billion by next year.

Data systems spending is also set to grow to US$230.4 million in 2023, up from US$218.6 million this year.

The REIT reported a resilient set of financial numbers for its fiscal 2022’s first half (1H2022).

Revenue edged up 0.3% year on year while distribution per unit (DPU) rose 2.5% year on year to S$0.05049.

The annualised distribution yield for the REIT stood at 5.8%.

OCBC Ltd (SGX: O39)

OCBC is one of Singapore’s three big banks and offers a comprehensive range of banking, insurance, and investment services.

The bank has held up well in the last two years and for its recent 1H2022 earnings, it reported that net profit rose 7% year on year to a new record high of S$2.8 billion.

OCBC also saw loan growth of 8% year on year and raised its interim dividend by 12% year on year to S$0.28.

With a trailing 12-month dividend of S$0.56, OCBC’s shares offer a trailing dividend yield of 4.7%

With rising interest rates, the lender looks set to benefit from an increase in its net interest margin.

In turn, a higher net interest margin should result in higher net interest income as the bank reprices its loans at higher rates.

OCBC also expects continued economic growth with improving unemployment rates in the region but cautioned about recession risks and a potential jump in default rates should the economy weaken.

Mapletree Logistics Trust (SGX: M44U)

Mapletree Logistics Trust, or MLT, owns a diversified portfolio of 185 logistics properties spread across eight countries with assets under management of S$13 billion as of 30 June 2022.

MLT reported a respectable set of financial and operating numbers for its fiscal 2023’s first quarter (1Q2023).

Gross revenue rose 14.6% year on year to S$187.7 million while net property income (NPI) increased by 13.2% year on year to S$163.2 million.

DPU was up 5% year on year to S$0.02268, and the trailing 12-month DPU stood at S$0.08894.

The trailing 12-month distribution yield for MLT’s units came in at 5.6%.

Portfolio occupancy remained high at 96.8% for the logistics REIT, and rental reversion registered a positive 3.4%.

Aggregate leverage stood at 37.2% with 80% of the REIT’s debt hedged to fixed rates, thereby mitigating against the sharp rise in interest costs.

Is it a good time to buy into Singapore REITs? If you’ve thought about it, then our latest REITs guide will be an essential read. This exclusive pdf report shows you why REITs are still excellent assets, what sectors to look out for and how to find good REITs today. The info inside can help you build a solid retirement portfolio. Click here to download it for FREE.

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Disclaimer: Royston Yang owns shares of Singapore Exchange Limited and Keppel DC REIT.

The post These 4 Singapore Blue-Chip Stocks Offer Safe Harbour During a Recession appeared first on The Smart Investor.