Top Dividend Stocks For 2025: Singapore SGX Stocks

While I would have recommended Hong Kong stocks such as LINK REIT due to its low leverage and yet high dividend yield; same as what i did in my for August 2024, this article is written for individuals who only invest within the Singapore Market. Below are a few companies which I view should garner good dividends for 2025.

The proof is in the pudding and a caveat that I own 2 of the 3 below stocks; I will not be putting them into my portfolio if they are not dividend giants.

Most of them are REITs and with the recent change in regulatory limits, these REITs are now very safe (higher ICR and lower leverage than regulatory requirements)

1) UnitedHampshire US REIT (Listed in Singapore)

A US REIT which operates Striple malls in the East Area of USA, with the low supply of stripe malls in USA, Utd Hampshire REIT will continue to have a high occupancy rate. For context, stripe malls are essential malls in neighbourhoods. They are built more for neccessity than luxury needs like the malls we have. If we think of it in a Singapore context, Unitedhampshire operates malls which houses NTUC/Sheng Shiong or kopitiam and less on shops such as Godiva or Zara. Similar to what we see in HDB heartlands.

The REIT contracts has built in rental growth annually. Its cost of debt has now stabilised. With property revenue having built in annual escalations, I forsee the REIT will increase in yield to about 10% based on its current share price.

The REIT has been actively divesting assets at above book value and buying new ones. This shows they are doing positive asset recycling. The REIT's leverage ratio is below 40% with the recent sale of a retail mall at above book valuation. With MAS increasing the leverage limit to 50%, Utdhampshire REIT is relatively safe. Dividend yields can be assured and it should be a 9% yielder for any would be investor.

At NAV of 72 US cents vs share price of 45 US cents, it is attractively priced.

2) Yangzijiang Financial (Listed in Singapore)

Its earnings has been consistent and therefore dividends given is around 6% yield at current price of 40 sg cents.

In recent times, the company has been deploying its spare cash to do share buybacks at 40 sg cents. It shows some degree of undervalue.

It is a fund management company with debt investments in China and Singapore. With 30% net cash and NAV of 111 cents, at 40 cents this company is a steal. An icing on the cake is that it does not use debt to do investments.

Hence an unlevered 6% yield is world beating.

3) ELITE UK REIT (Listed in Singapore)

Due to decreasing UK borrowing cost, the REIT has reported an increase in distribution putting it in the 9% yield category as well.

Its main tenant is the UK government which ensures revenue stability. In terms of gearing, the REIT is at 43%. Elite has an interest coverage ratio of 3 times. It passes up all MAS's regulatory requirements. The REIT has a few vacant buildings where one it is planning to do AEI to re purpose it for data centre purposes. When successful, the company should earn extra property income. I do expect the REIT to be a 10% dividend yielder as time progresses.

Notable Mention

Due to the relaxation in MAS's regulatory rules, I forsee PRIME US REIT would restart their dividend. The REIT could be another 8-9% dividend yielder at its current price of 16.4 US cents.

MAS Latest Changes For REITs: 50% Leverage and 1.5 times ICR (which includes Hybrid Securities Distribution)

The latest MAS rules for REITs is simple and helps to ease some of the pressure on leverage.

Summary

Basically, MAS has simplified the limits and can be understood simply as:

(i) REIT leverage should not exceed 50%;

(ii) Interest Coverage Ratio, ICR, (including distribution from hybrid securities) should not be lower than 1.5 times, a decrease from the previous 2.5 times. And sensitivity analysis to be reported under situations of drop in property income or interest rate rises

My Thoughts

These changes help investors understand the regime much better because previously there was a 45% leverage limit and a 50% leverage limit with an "if" condition. Everything is now simplified and even for what is defined under the ICR, it is clear. No more wriggling their way out (for the Mapletree REITs).

Higher Leverage Limit

It is definite good news for all REITs since their regulated leverage limit has been raised and it is now cap at 50%. Suntec REIT is a definite beneficiary as they were hovering near the 45% limit and had a very low interest coverage ratio.

The US REITs are another group of beneficiary with 2 out of the 3 REITs having exceeded the 45% leverage limit and walking on thin ice for their ICR. It is worth noting for both PRIME and Manulife (MUST), their ICR are at 2 times range but due to their revaluation of properties they were close to breaching/have breached the regulatory limit for leverage. So in a way, the new rules help ease pressure off and for MUST it gives a boost to their deleveraging strategy.

Market Movements

While there was not much price movement in the REITs space post the news on 29 November 2024, I do take the news as a positive. With a higher and clearer definition of leverage, it gives assurance to the distribution of REITs (of course the distribution of REITs will still be affected by the property income, which affects ICR too). 

This is a plus and I will evaluate increasing my portfolio to REITs knowing there is a less stringent regulatory limit in place giving more headroom for (i) troubled REITs to breathe and in turn resume dividend or (ii) REITs with stronger balance sheet can now take on more AEI or smaller buildings to increase income.

Manulife US REIT: Expect Lower Occupancy and Expectations of Its Divestment Plans (Nov 2024)

As expected, the office building in Capitol of Manulife US REIT (MUST) portfolio was sold. One of the main reason why I thought Capitol would go was because it is a good asset with a high occupancy rate relative to other offices in MUST's portfolio.

2024 Divestment Target (108/230)

Based on its 2023 restructuring plan. MUST has to sell US$122 million more in property valuation. While its Tranche 1 buildings are placed on the market, I do feel 02 buildings (which coincides to how many they had placed for sale) would be negotiated for sale close to the agreement deadline; just over the line to achieve US$122 million

Tranche 1 Assets are Weak

Figueroa- Expected sale but a big downward valuation. Figueroa is currently valued at US$139 million for end 2023. However, in its submarket, the sales of its comparables are at US$137-$140 psf. Realistically, Figueroa is worth about US$100 million.

Diablo- Majority of its tenants are vacating end 2024, it is likely occupancy will drop to 30% level. Being an old office building of Class B status, I think further downward revaluation will happen. The building looks like a US$30 million value and likely NPI will turn negative in 2025 Letting it sit on MUST book will be a big negative. Likely this building will be demolished by either MUST or a new buyer.

Penn- Another old building in MUST portfolio. Questions will be raised if the US Treasury will downsize its office space in Penn, which I believe is likely. No doubt refurbishment was done but it is an old building that regularly needs maintenance CAPEX to ensure its lifespan. I  expect it to be worth about US$80 million.

Centrepoint- Has the lowest amount of expiring leases among the 4. In terms of value, it is likely the most resilient and can fetch US$65 million range.

Overall Lower Occupancy, Likely Lower Valuations

Expect another downward valuation come end 2024. "Green shoots" of recovery is not here. It is unlikely the re-valuation will result in a convenant breach of leverage ratio of 80%.

I do not expect the submarkets MUST are in to recover until end 2026. However, the REIT has to complete its divestment plan by mid 2025. It has to sell about US$200 million more in properties.

The need to raise liquidity is putting the REIT in a weak position for sales negotiation. Buyers know it has to sell and during a time when office spaces are still weak.

PRIME US REIT Thoughts: Future Plans in 3Q results and what CEO has to do to Improve Sentiments

Exactly 02 months ago, PRIME REIT's CEO Rahul Rana went for an interview and in the article he explained about how PRIME US REIT plans to convey to investors of where the REIT is today and where it is heading. All these to improve sentiments and bring share prices back.

3Q results came out and in this section of PRIME US REIT's slides, they did tell us the 03 year plans of the REIT:

In it, PRIME REIT listed 06 steps it will take. Step 1 to 4 are indeed sound and what the REIT has been doing. At a leverage ratio of 45.4%, it is indeed sound for PRIME to improve property valuations so that the amount of debt remains the same but leverage will fall mathematically.

Step 6 is something I am definitely looking forward to because, as investors, we are buying a REIT for dividend and for a REIT to resume its dividend, this mean business as usual.

Step 5 is something I have views about.

How to Improve Sentiments and Share Prices

To address the elephant in the room, PRIME US REIT share prices are indeed low. At current 0.3 times of price to book value, investors are indeed pricing the REIT in distress despite the successful refinancing. To me, there could be 02 reasons behind it

High Leverage

PRIME's leverage stands at 45.4%, it is probably too high for many investors liking, If PRIME is able to drive occupancy and in turn improve valuations, pushing the leverage to 40.X% and below, it would do wonders to sentiments. This can be achieved by two ways. 

Firstly, improvement in property values and secondly paying down the debt. What is interesting is that PRIME drew down on its revolving credit this quarter, this intrigues me and I though it was not financially wise to do so. Personally for this half of the year, I feel PRIME should keep to distributing only 90% of taxable income with the rest dedicated to paying down the loans.

The first priority to PRIME is to target 40.X% and below leverage ratio, without the need of diluting existing shareholders via rights issue or share placement. This is very important. The REIT should focus on it and stop drawing down on too much loan from its credit facility.

Paying More Dividend

From 2025, PRIME should resume paying out good dividends. In my view, where the share price is now is because sentiments do not think PRIME will restart a good payout to investors. PRIME has to be forthcoming in its dividend plans for its upcoming year end financial report. It has to guide with a ratio for its dividends such as "90% of DI to be distributed". This is what Unitedhampshire US REIT has done.

If the management wants PRIME to be valued at say 0.6 times book value, it has to consider how much to pay. In my view, from 2025, the market will likely value PRIME at 7-8% dividend yield of what it pays out. Hopefully, the management gets my hint. 

If it wants PRIME to be at say 30 US cents, payout has to be 2.4 US cents. If it cannot achieve it due to its cashflow, management will know share prices will be much lower and their perceived undervaluation will remain.

However, the REIT has to be cognizant its leverage ratio should not be compromised like in the past where it was paying out 100% of distributable income and increasing its leverage to pay for CAPEX. THIS SHOULD NOT HAPPEN AGAIN!

What I am Concerned: "Resuming Acquistions"

While it is indeed true there are bargains out there in the US commercial space, I do not think the REIT should go on an acquistion. Of priority is that it should manage its balance sheet first. PRIME should not be buying US office buildings from its sponsors. Any purchase, utilising leverage without a rights/share placement, will only push the REIT's leverage up.

Shareholders are jaded from collecting little dividend and will not be willing to participate in a rights issue to fund an acquistion. I sincerely hope the management is aware of this. Priority should be given to lower the leverage on the balance sheet, then consider paying a good dividend to improve sentiments so that share prices can go up to 0.6 times book value like what Singapore office REITs have achieved.

Buying more US office commercial buildings should not be done. Yes, many quality US office buildings are now put for sale, but this should not be what PRIME goes after. Furthermore, it should not be a purchase from any of its sponsors. If it's sponsor wants to offload, it should just sell its properties to outside buyers. If it is Keppel Capital, it has its own REIT of KORE to sell to, KORE is holding old assets which is burning so much CAPEX, maybe KORE should just take it to rejuvenate its terrible assets.

Plight of the US Office Market

The amount of US office space vacant is tremendous, many blue democrat states are seeing high vacancy because businesses are leaving due to their high corporate taxes and high number of homelessness which affects security. What makes it worse is that the blue states have much better welfare benefits which are attracting homeless people from other states.

I seriously do not think California will return to its glory days until it cuts its welfare benefits and corporate state tax. If PRIME is successful in driving Tower I occupancy, it should do so and then sell it. One thing i notice in many US office REITs is that the vacancy rates for office buildings in many blue democrat states are higher than that of the Republician states. This is something PRIME should evaluate too. Valuers will be aware of this and abscribe lower values for office buildings in blue states. Sorrento Towers has so far bucked the trend and I think PRIME US REIT too should consider monetising this asset. 

If PRIME REIT starts to incur too much capital expenditures, I do think the REIT should start to offload such buildings as well such as Promende and Tower 909.

Thoughts on Latest BTO Ballotting Result: Singapore has a Severe Housing Problem for Genuine Flat Seekers

The ballotting for the latest BTO exercise and under new housing policy guidelines is almost ending. One prominent measure is the large clawback amount to deter HDB flippers for good BTO estates. For context, the clawback amount is based on the price of the flat sold which greatly hurts any profit motive of flat flippers. Below is an excrept:

"If a buyer purchases a four-room Prime flat at S$650,000 and resells it for S$1.2 million in the future, the 9 per cent subsidy clawback comes up to S$108,000, which is equivalent to gross gains of more than S$400,000"

The link to the BTO application rate can be viewed here. Hence what we are seeing from the application are demand from genuine home buyers. And for the standard sites, those pesky flat flippers who seek to profit from BTO lottery (after all for prime/plus flats, there are 6-9% clawbacks on the selling price and a long minimum occupation period which reduces their IRR returns)

Multiple Sites Across Singapore

As said 9 sites across Singapore to meet aspiring flat owners was put out in this mega exercise. This meant almost all who needed a flat genuinely could ballot because there are sites everywhere

HDB BTO Demand is a Lot

Based on current ratio, it shows Singapore has a severe housing problem. As recap, BTO is open to only the low and middle income Singaporeans. Let's look at it segment by segment. 

Singles Segment

In a nutshell, there are too many low/middle income singles desperately in need of a house in Singapore. Even in the hugely unpopular Taman Jurong estate, there is a sufficient amount of desperate singles such that the 2 room flats allocated to singles is oversubscribed that it can fill up other undersubscribed segments such as senior citizens.

All the pent up demand goes to show how much neglect the PAP government has given to the singles of Singapore, close to treating them as second class citizens in the country. 

First Timer Couples Segment

Ovsersubscription has happened as well with the median application rate for 4 and 5 rooms exceeding 1.5 ratio. It goes to show as well as the number of genuine low/middle income seeking for a home has outstripped the supply in this mega BTO exercise.

Thoughts

The government can give multiple reasons but under the new policy, flat flippers has been severely deterred and those who are ballotting for this exercise are genuine individuals who need a flat. The ballotted ratio is staggering especially in the singles group.

This shows the failure of the government to provide homes for its own citizens. The current problem has helped many developers chanced upon selling expensive housing units to desperate citizens of this country. The market for aspiring home owners in Singapore is utterly dire. 

My view is that either a large amount of housing units has to be put forth in the next 6 months to a year to solve Singapore's housing crisis. Alternatively another approach is to review the population policy. One contributing factor to the HDB demand is that the foreigner population has grown tremendously. Foreigners are only able to rent and their large number are eating up all the excess housing units going into the market; in turn contributing to the booming rental market and allowing flat flippers to profit by marketting HDB flats as rental dividend machines.

One solution is to restrict the foreigner population growth to only about 0.5% -1% similar to the citizenry growth. It will help Singapore citizens a lot but the trade off is that the wealthy of the country will see a slower growth of wealth via real estate.

Leverage in Stock Market is Better Than Singapore Property?

Just a thought process for now, but I am contemplating.

We have often heard about Singapore property agents who tell us to lever up to enjoy appreciation of Singapore stock property and using rental income to cover the property loan expense. For context, many Singapore properties are only selling at about 3% rental yield (after non owner occupied taxes by IRAS and agent commission). This gives me a "what the fuck" moment. Lets delve more into the maths, how property agents tell us this covers our loan bills.

Property Asset- $2 million, (Loan 50%/Equity 50%)

Rental Income- $60,000, Loan expense at 4.1% interest- $41,000.

Before the factor of capital gains, the property asset yields about 2% in equity.

How about Stocks?

Well in many SGX stocks, many companies such as United Hampshire REIT/Asian Pay TV nad HK related stocks such as LINK REIT and Petrochina etc are yielding 8-10%. 

And with margin loans being low at 4.5-5.58% (see POEM margin financing promotion)

Before the factor of capital gains, these companies are yielding about 8-12% on a 50% loan/50% equity modelling.

In short, many dividend stocks can be leveraged on cheap loans in Singapore, with returns better than buying any Singapore property- doing a share financing loan on Asian Pay TV trust will yield a projected 21% annual returns on equity.

This brings me to the question of why should we leverage in singapore properties when so many SGX and even Hong Kong stocks are giving better returns. For context, below are the approximate returns for a few dividend stocks based on a 50% loan/ 50% equity and based on POEMS margin financing rates.

Asian Pay TV Trust (SGX-listed)- Annualised returns on equity (21%)

UtdHampshire REIT (SGX-listed)- Annualised returns on equity (11.5%)

Petrochina (HKEX-listed, which means interest is 5.58%)- Annualised return on equity (10.3%)

LINK REIT (HKEX-listed, which means interest is 5.58%)- Annualised return on equity (8.0%)

<Not doing a sponsored post for POEMS, just an idea that with leverage using Singapore loan on stocks, one could be hitting a gold mine>

60% of Portfolio in China, But I Am Still Holding

 China/the Hang Seng Index has rallied. As of now, the run up has resulted in my 60% of portfolio being in China. However, I still will not sell. There are a few reasons both Macro and Micro

Hang Seng Index is Undervalued relative to Other Indexes

Forward PE wise based on bloomberg - Hang Seng is still lower than the S&P 500 and at a significant difference. If things were to be the same, we are looking at an upside for a further 90% for the Hang Seng Index and China stocks; this despite the rally

Price Earnings of My China Stocks are Low

Alibaba and Petrochina are trading at 14 times and 7 times price earnings respectively. Their peers (Amazon and Exxon) are at 40 times and 14 times price earnings. The China companies are still relatively cheap.

Dividend Yield of My China Stocks are High

Link REIT and Yangzijiang Financial are at 6.5% yield and Petrochina is at 7% yield. Their next best alternative are far apart. It will take a much higher upside for these stocks to be 4% yield before I would consider divesting- that is because that's where their peers are at. Exxon is at 3% yield.

LINK REIT is the largest REIT in Asia with the lowest leverage ratio beating any Singapore REIT. Yet local REITs are at 4% dividend yield while supposedly the best REIT with the lowest leverage ratio is at 6.5% yield. The difference in yield is too stark.

So until a further upside 60% takes place for these stocks, I am not divesting. 

Conclusion

In my view Hong Kong/China stocks are still relatively attractive for investments. Hence, it is unlikely I will divest. Sentiments has changed and China stocks are now favoured.

What makes it ironic is that even at this levels, blue chips stocks of the Hang Seng Index are at 6.5-7% yield. That is better than any Singapore or USA stocks.