Are Singapore blue chips a good investment?
In the past few years, there has been a proliferation of fund offerings in Singapore which enable individuals with low capital to accumulate blue chips. But are Singapore blue chips truly a good investment?
Here, we take a closer look at the returns from 2011 – 2015 of the 30 component stocks that make up the Straits Times Index (STI), and let you be the judge.
High dividend yield compensates for capital loss
20 out of the 30 major Singapore blue chips closed lower at the end of 2015 compared to the beginning of 2011.
However, when dividends are included, the total return is actually positive. In fact, over the specified 5 year period, the average total return including dividends of these 30 stocks is 17%.
The stock with the highest total return of 164% is Thai Beverage, which saw huge capital appreciation. Following close behind is ComfortDelGro with a total return of 116%. SATS and Starhub also performed well with a total return of 80% and 79% respectively.
profitable with Dollar-Cost Averaging
Moreover, a dollar-cost averaging (DCA) approach could be applied with much success. This is suitable for investors who do not have a lot of time to spend on researching stocks, and who are unable to closely follow the financial markets.
DCA involves purchasing a fixed dollar amount of a stock on a regular schedule, regardless of the share price. While manual execution is possible, automatic execution is far more common. This can be done via a DCA plan with a broker such as the POSB Invest-Saver, OCBC Blue Chip Investment Plan and POEMS Share Builders Plan. Those plans allow you to set aside a small amount of money and begin investing with as little as S$100 per month. There is also the option of reinvesting your dividends, which will compound your returns.
To obtain the total return of Singapore blue chips, we do the following calculation:
The table below shows the returns of Singapore blue chips sorted by total return. There is a column showing the respective contribution from capital gains and dividends over the 5 year period.
Note: Dividend calculated for this purpose is based on the price as at 3 Jan 2011 and may not represent actual dividend yield earned by individuals. For investment purposes, individuals should assess calculations based on their entry price and current dividend amount.
YZJ Shipbldg SGD
 All dividends issued within the analysed period (3 Jan 2011 – 31 Dec 2015) are included regardless of the underlying period for which the dividend was issued
 Dividends in THB converted to SGD at spot rate on date paid
 Total dividends includes taxable dividends reported before tax
 Dividends in USD converted to SGD at spot rate on date paid
 Capital gain has been adjusted for the bonus issue in 2011
 Data computed based on 1 Apr 2011 – 31 Mar 2016 as HPH Trust IPO-ed on 18 Mar 2011
 Dividends in HKD converted to SGD at spot rate on date paid