The Benefits of Owning Blue-Chip Stocks in Singapore 2019
In the world of investment, blue-chip stocks are perceived to be safe, old-fashion, even a little boring. For this reason, they are sometimes overlooked by the more adventurous or ambitious investors looking to make a whopping return on their money. Often these are the young professionals, trying to run before they can walk and net a huge profit off just a few quick investments.
But when it comes to using your hard-earned cash wisely, what could be better than placing it in stocks that have a proven track record for appreciating over long periods, regardless of any financial storms that are blowing around them?
You only need look at the portfolios of wealthy investors, retirees, non-profit organisations and the super-rich to know that blue-chip stocks are most definitely worthy of your time and more importantly your money.
What are blue-chip stocks?
Blue-chip stocks are so-called because of the status of the blue-chip in poker as the most valuable counter in the game. The term refers to stable, high-return stocks in large corporations that boast a significant market share. These will often be companies that are famous, maybe even household names. Global examples include Apple, IBM Corp., Goldman Sachs, and Johnson & Johnson.
So why are blue-chip stocks such a hit with the top 1%? We explore the reasons they, and perhaps you should be investing in blue-chip stocks in 2019.
(Almost) Guaranteed returns
As blue-chip stocks generally return at a rate of between 8% and 12%, they are considered to be a great asset to any portfolio. It is true that the going isn’t always easy, sometimes stocks may experience huge and lengthy drops in value. But the value tends to level out over time, and if the shareholder paid a reasonable price to begin with, they will likely see a decent return.
Blue-chip stocks are known for paying uninterrupted dividends which increase over time. Most importantly however the dividend payments are regular meaning you can reliably supplement your monthly salary.
The fact that you are investing in reputable household names that are listed on the stock exchange makes this a stable and solid investment. As a result, in times of economic downturn, many more investors turn to these kinds of stocks which will only encourage further growth.
Blue-chip companies boast strong balance sheets, failsafe cash flows and tried and tested business models and consistent growth.
Owing to the fact that blue-chip stocks are more of a long-term investment that weathers financial storms over long periods of time, they are a great way to shore up the more volatile investments in your portfolio. Owning a few blue-chip stocks is a great way to balance your overall investment and turn a profit in the long term, regardless of any crashes or catastrophes elsewhere.
Strong in times of crisis
If anything, blue-chip stocks can benefit from market crashes, as they buy or drive out the weaker competitors in times of struggle. This makes blue-chip stocks a sensible, safe method of acquiring passive income in the long term.
If the stocks are held directly, the owner can die with them in their estate, meaning they will transfer over to their next of kin. This means your inheritance does not get taxed, leaving your children more comfortable than if they had received the inheritance in cash or property.
So, what blue-chip stocks should Singaporean’s have their eye on in 2019? A quick scan of the Straits Times Index will offer up a range of great options. When looking to invest in blue-chip stock, you want to assess a company’s profitability over time, as well as the size and regularity of the dividend yields.
These three blue-chip companies have more than doubled their profits over the course of the last ten years, suggesting they will be a stable and profitable long-term investment for any wise investor.
DBS Group Holdings Ltd (SGX: D05), a financial giant both at home in Singapore and overseas, was already huge a decade ago, but its profitability since has still been impressive. Between 2008 and 2017, the blue-chip company’s income grew by 98% to S$11.9 billion, with profit growing by 132% to S$4.4 billion.
Meanwhile, in further great news for sensible investors in DBS, dividend per share was up to S$1.43 in 2017 versus S$0.65 in 2008, a growth of 120%.
Thai Beverage Public Company Limited (SGX: Y92), the food and drinks company that conducts most of its operations in Thailand, has had a fantastic ten years and is looking forward to ten more profitable years to come.
Between 2008 and 2017, their revenue grew by 91% to THB 203.3 billion, with profit growing by 227% to a whopping THB 34.7 billion.
Venture Corporation Ltd (SGX: V03) is a very successful electronics manufacturing services provider that offers a wide range of services and expertise.
Thanks to the boom in the electronics market, Venture Corporation saw profit double from 2008 to 2017. This brought net profit to S$372.8 million. Meanwhile, revenue grew to $4.0 billion. Though they have fallen upon harder times in the last year, it is anticipated that shares will bounce back to their former health, much to the relief of long term investors.
If you’re looking for high-dividend stocks for your next blue-chip investment, Hutchison Port Hldg Trust (SGX: NS8U), Singapore Telecommunications Limited (SGX: Z74), Singapore Exchange Limited (SGX: S68) and Ascendas Real Estate Investment Trust (SGX: A17U) are good ones to look out for.
As with any investments, it is important to conduct your own thorough research and seek professional advice before parting with your hard-earned money.