These 4 blue-chip Singapore stocks offer a safe harbor in a recession

SGX

In recent months, passenger numbers have increased as countries reopen their borders and air travel resumes.

Pent-up demand for vacations has prompted people to open their wallets in a big way, with airfare prices jumping 25% in the past year.

However, endemic inflation could dampen consumer spending, with Singapore’s core inflation dropping to 5.1% in August, near a 14-year high.

The prospect of higher interest rates is also negative for businesses as they curb their capital spending.

The spectrum of a recession looms on the horizon due to the combination of weaker consumer demand, rising interest costs and high inflation.

Investors need not worry, however.

You can find a safe harbor in reputable places blue chip stocks that have withstood many storms.

Here are four that should give you peace of mind and a good dividend give way as you lean in for the next storm.

Singapore Stock Exchange Limited (SGX: S68)

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

The stock market operator has shown remarkable resilience over the past two years.

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

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

SGX paid a dividend of S$0.32 for the 2022 financial year, unchanged from a year ago.

The stock operator’s shares offer a historic dividend yield of 3.4%.

The group intends to leverage its over-the-counter exchange platform to grow its turnover, aiming for 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 center REITs with a portfolio of 21 data centers in nine countries worth S$3.5 billion as of June 30, 2022.

Data center growth is expected to be supported by strong global demand for data storage.

Research firm Gartner predicts that global end-user spending on public cloud services will reach nearly $600 billion by next year.

Spending on data systems is also expected to hit US$230.4 million in 2023, up from US$218.6 million this year.

The REIT has released a set of resilient financial figures for the first half of its fiscal year 2022 (1H2022).

Revenues edged up 0.3% year-on-year, while distribution per unit (DPU) increased 2.5% year-on-year to S$0.05049.

The REIT’s annualized distribution yield was 5.8%.

OCBC Ltd (SGX: O39)

OCBC is one of the Big Three Banks in Singapore and offers a full range of banking, insurance and investment services.

The bank has held up well over the past two years and for its recent 1H2022 resultsit said net profit rose 7% year-on-year to a new high of S$2.8 billion.

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

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

With rising interest rates, the lender should 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 warned of recession risks and a potential increase in default rates if the economy weakens.

Mapletree Logistics Trust (SGX: M44U)

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

MLT released a respectable set of financial and operational figures for the first quarter of its fiscal year 2023 (1Q2023).

Gross income increased 14.6% YoY to S$187.7m, while Net Property Income (NPI) increased 13.2% YoY to S$163.2m Singapore dollars.

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

The 12-month distribution yield for the MLT Units was 5.6%.

The occupancy rate of the portfolio remained high at 96.8% for the logistics SCPI and rental reversion recorded a gain of 3.4%.

Overall indebtedness stood at 37.2% with 80% of the REIT’s debt hedged at fixed rates, thus mitigating the sharp increase in interest charges.

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

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