The Straits Times Index (SGX: ^ STI), which is widely regarded as Singapore’s stock market barometer, is made up of 30 blue chip companies.
However, it’s not always the same companies that make up the coveted list.
Each quarter, the index is reviewed and one or two of the 30 companies can be replaced.
The last change was on June 22, 2020, when Singapore Press Holdings (SGX: T39) has been discontinued in favor of Mapletree Industrial Trust (SGX: ME8U).
Before that, Mapletree Logistics Trust (SGX: M44U) took the place of Golden Agri-Ressources Ltée (SGX: E5H) in December 2019.
As such, it is possible that some of STI’s current actions will be replaced by other companies in the future.
Who are the candidates, you will ask me? This is where the reserve list comes in.
Top-notch STI applicants
Meanwhile, the review also names five companies that form a stock reserve list.
These “bench stoves” are meant to be up to the task in the event of abandonment of an existing STI component.
As it turns out, these five potential blue chip stocks of the future pay a dividend as well, which should delight income-seeking investors.
Without further ado, here are the five companies vying for a spot in Singapore’s STI.
Olam International Ltd (SGX: O32)
Olam is an international food and agriculture company that supplies food ingredients, feeds and fibers to customers around the world.
In the company’s latest earnings report for the first six months of 2021, revenue rose 33.7 percent year-on-year to S $ 22.8 billion, while operating profit jumped 51.4% year-on-year to S $ 641.6 million.
The group also proposed an interim dividend of S $ 0.04 per share, which translates into an annualized dividend yield of 4.6%.
Olam also announced its intention to split up its food ingredients business, Olam Food Ingredients (OFI).
OFI will move towards a simultaneous initial public offering (IPO) on the London Stock Exchange (LON: LSEG), as well as the Singapore Stock Exchange (SGX: S68), in the first half of next year.
Suntec Real Estate Investment Trust (SGX: T82U)
Suntec REIT manages commercial and office properties in Singapore, Australia and the UK.
For the first half of 2021 (1H21), the REIT recorded net property income (NPI) of S $ 112.6 million, an increase of 23.9% year-on-year.
Distributable income also increased 14.6% year-on-year to S $ 118.2 million, thanks to contributions from completed acquisitions and developments.
In line with the good results, Suntec REIT has increased its distribution per unit (DPU) by 26.1% from 1H20 and will pay S $ 0.04154 per unit.
The distribution represents an annualized return of 5.9% to unitholders.
Suntec REIT also announced the acquisition of a Class A office building in London’s central business district.
The acquisition is expected to generate DPU gains and will increase the REIT’s geographic diversification.
Keppel REIT (SGX: K71U)
Keppel REIT owns several Class A commercial properties in key business districts in Asia.
The REIT has assets under management (AUM) worth S $ 8.7 billion in Singapore, Australia and South Korea.
For the six-month period ended June 30, 2021, Keppel REIT’s NPI jumped 43.1% year-on-year, from S $ 59 million to S $ 84.4 million.
The REIT also reported healthy portfolio indicators.
The occupancy rate of the committed portfolio remained high at 96.7%, while the weighted average lease term (WALE) of the REIT stood at 6.2 years.
As a sign of resilience, Keppel REIT’s top 10 tenants, who contribute 35.6% of gross rent, have recorded an impressive WALE of 11.2 years.
The REIT also increased its DPU by 5% year-over-year and paid unitholders S $ 0.0294 per unit.
This distribution represents an annualized return of 5.5%.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, owns and invests primarily in suburban commercial properties in Singapore.
FCT’s retail portfolio includes nine shopping centers, including Causeway Point, White Sands, Century Square and Tampines 1.
In May 2021, during phase 2 (enhanced alert), the Singapore government put in place increased measures to curb the spread of COVID-19 in Singapore.
However, FCT’s shopping malls continued to show resilience.
For the quarter ended June 30, 2021, tenant sales returned to near pre-COVID levels despite the tightening of measures.
The occupancy rate of the REIT’s retail portfolio remained stable at 96.4%.
FCT’s DPU was S $ 0.05996 for its first fiscal semester ended March 31, 2021, which provides unitholders with an annualized return of 5.3%.
Netlink NBN Trust (SGX: CLJU)
NetLink NBN Trust designs, builds, owns and operates Singapore’s National Next Generation Broadband (NBN) passive fiber network.
The network is an initiative of the Government of Singapore to provide very high speed broadband access across the country.
As Singapore’s leading fiber network provider, NetLink has a resilient business model that has helped the company emerge from the pandemic relatively unscathed.
In the company’s latest quarterly report, it announced that revenue increased 5% year-on-year to S $ 93.4 million, with after-tax profit similarly improving by 6.1% in year on year to reach S $ 24 million.
NetLink’s last distribution of $ 0.0255 was for the six-month period ending March 31, 2021.
This distribution, when annualized, represents a return of 5.2% to unitholders.
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Disclosure: Herman Ng owns shares of Mapletree Industrial Trust.
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