As investors in Singapore, we’re very fortunate. That’s because we get to receive both any capital gains and dividends completely tax free.
Beyond that, though, there’s also a robust retirement system in place via the Central Provident Fund (CPF) where various offshoots, like the CPF Investment Scheme (CPFIS), allow us to grow our retirement wealth.
Outside of the traditional retirement investment options in Singapore sits the Supplementary Retirement Scheme (SRS). It’s a voluntary scheme whereby contributions to the SRS are eligible for tax relief.
Singapore citizens and PRs can get tax relief on SRS contributions of up to S$15,300 annually. Meanwhile, for foreigners resident in Singapore, the annual SRS cap for tax relief is S$35,700.
So, given investors can only withdraw these funds (without penalty) at the statutory retirement age of 62, it makes sense to buy solid stocks that can grow your capital and return passive income into your SRS each year.
With that in mind, here are two solid Singapore dividend stocks that investors can buy for their SRS accounts.
1. Singapore Exchange
Where do we all buy and sell Singapore stocks? On the SGX of course, which is owned and operated by Singapore Exchange Limited (SGX: S68).
The city state’s sole stock exchange operator has a monopoly on the trading of public equities and bonds here.
Having listed in 2000, Singapore Exchange has become a stalwart of the local stock market and is a constituent stock of the benchmark Straits Times Index (STI).
The company had a solid Return on Equity (ROE) of 34% in its latest fiscal year (FY) 2021 (for the 12 months ending 30 June 2021).
Meanwhile its operating profit margin is incredibly stable, at 50% and remains at the same level that it was back in FY 2016.
Over that five-year period, Singapore Exchange has managed to grow its revenue from S$818 million in FY 2016 to S$1.06 billion in FY 2021.
Perhaps most importantly, though, is that the stock exchange operator has grown its dividend per share (DPS) at a compound annual growth rate (CAGR) of 9.2% over the past 20 years (see below).
That should allow SRS account holders that have SGX shares to re-invest that dividend on a more frequent basis – allowing for faster compounding.
Currently trading at a 12-month forward dividend yield of 3.2%, SGX shares offer a reasonable passive income stream.
Finally, with the exchange operator recently expanding its business by listing Special Purpose Acquisition Companies (SPACs), this could be a solid long-term addition to any SRS account.
2. Venture Corporation
Second is electronic components and technology services, products and solutions provider Venture Corporation Ltd (SGX: V03).
The company, which has manufacturing facilities in Malaysia and China, is involved in everything from life sciences and healthcare to financial technology.
It has grown its business over the years and now counts large multinationals, such as Philip Morris International Inc (NYSE: PM), among its clients.
While Venture was initially impacted by the Covid-19 pandemic and shutdowns across Asia, it has bounced back.
In 2021, Venture saw its full-year revenue hit S$3.1 billion, up 3.1% year-on-year. However, this masked a strong second half of the year, where revenue was up 17% year-on-year versus the second half of 2020.
Meanwhile, net profit for the whole of 2021 was S$312.1 million, up 5% year-on-year, while earnings per share (EPS) of S$1.07 were up 4.7% year-on-year.
In its full-year 2021 earnings release, management noted that it “anticipates a robust demand outlook based on customers’ orders and forecasts across various technology domains”.
Like many hi-tech manufacturers, Venture did say that the key obstacle to fulfilling these orders are the ongoing supply chain disruptions.
However, on the whole Venture remains robust. The company boasts a cash balance of over S$800 million – as of 31 December 2021 – which amounts to around 16% of its total market cap.
Having grown its dividend over the years (racking up a dividend CAGR of 6.8% over the past 20 years), Venture shares are now yielding 4.4% on a 12-month forward basis.
Investing in retirement dividends
When investing in the SRS, it’s important investors focus on the potential returns over decades and not just years.
Given the solid businesses that both Singapore Exchange and Venture possess, as well as the growing dividends they pay out, these are two stocks investors can buy and hold long term in their SRS accounts.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares in Venture Corporation Ltd.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.