The Straits Times Index (SGX: ^STI), which is widely viewed as the stock market barometer for Singapore, is made up of 30 different blue-chip companies.
However, it is not always the same companies that make up the coveted list.
Every quarter, the index is reviewed and one or two of the 30 companies may be replaced.
The last change happened on 22 June 2020, when Singapore Press Holdings (SGX: T39) was dropped in favour of Mapletree Industrial Trust (SGX: ME8U).
Prior to that, Mapletree Logistics Trust (SGX: M44U) took the place of Golden Agri-Resources Ltd (SGX: E5H) in December 2019.
As such, it is possible that some of the current STI stocks may be replaced by other companies in the future.
Who are the candidates, you may ask? That’s where the reserve list comes in.
The STI blue-chip candidates
Meanwhile, the review also names five companies that form a reserve list of stocks.
These “benchwarmers” are meant to step up to the plate should any existing STI constituent drop out.
As it turns out, all five of these potential blue-chip stocks of the future also pay a dividend, 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 business that supplies food ingredients, feed and fibre to customers worldwide.
In the company’s latest earnings report for the first six months of 2021, revenue rose 33.7% year on year to S$22.8 billion, while operating income 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 to an annualized dividend yield of 4.6%.
Olam has also announced plans to spin-off its food ingredients arm, Olam Food Ingredients (OFI).
OFI will be headed for a concurrent initial public offering (IPO) on the London Stock Exchange (LON: LSEG), as well as the Singapore Exchange (SGX: S68), in the first half of next year.
Suntec Real Estate Investment Trust (SGX: T82U)
Suntec REIT manages retail 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, a year on year rise of 23.9%.
Distributable income also rose a respectable 14.6% year on year to S$118.2 million, driven by contributions from acquisitions and completed developments.
In line with the strong results, Suntec REIT hiked its distribution per unit (DPU) by 26.1% compared to 1H20, and will pay out S$0.04154 per unit.
The distribution represents an annualised yield of 5.9% for unitholders.
Suntec REIT also announced the acquisition of a Grade A office building in London’s central business district.
The acquisition is expected to be DPU-accretive and will increase the REIT’s geographic diversification.
Keppel REIT (SGX: K71U)
Keppel REIT is the owner of several Grade A commercial properties in key business districts around Asia.
The REIT has assets under management (AUM) worth S$8.7 billion in Singapore, Australia and South Korea.
For the six months ended 30 June 2021, Keppel REIT’s NPI surged by 43.1% year on year, from S$59 million to S$84.4 million.
The REIT also reported healthy portfolio metrics.
Committed portfolio occupancy remained high at 96.7%, while the REIT’s weighted average lease expiry (WALE) stood at a long 6.2 years.
As a sign of resilience, Keppel REIT’s top 10 tenants, who contribute 35.6% of gross rent, had an impressive WALE of 11.2 years.
The REIT also increased its DPU by 5% year on year and paid unitholders S$0.0294 per unit.
This distribution represents an annualized yield of 5.5%.
Frasers Centrepoint Trust (SGX: J69U)
Frasers Centrepoint Trust, or FCT, owns and invests primarily in suburban retail properties in Singapore.
FCT’s retail portfolio comprises nine malls, including Causeway Point, White Sands, Century Square and Tampines 1.
In May 2021, during the Phase 2 (Heightened Alert), the Singapore government implemented increased measures to curb the spread of COVID-19 in Singapore.
However, FCT’s malls continued to display resilience.
For the quarter ended 30 June 2021, tenant sales returned to near pre-COVID levels despite the tightened measures.
The REIT’s retail portfolio occupancy remained stable at 96.4%.
FCT’s DPU was S$0.05996 for its fiscal first half ended 31 March 2021, which offers unitholders an annualized yield of 5.3%.
Netlink NBN Trust (SGX: CLJU)
NetLink NBN Trust designs, builds, owns and operates the passive fibre network of Singapore’s next-generation nationwide broadband network (NBN).
The network is a Singapore government initiative to provide ultra-high-speed broadband access nationwide.
As the main fibre network provider in Singapore, NetLink has a resilient business model that has helped the company emerge relatively unscathed from the pandemic.
In the company’s latest quarterly report, it announced that revenue had inched up 5% year on year to S$93.4 million, with profit after tax similarly improving by 6.1% year on year to S$24 million.
NetLink’s last distribution of S$0.0255 was for the six-month period ending 31 March 2021.
This distribution, when annualized, represents a yield of 5.2% for unitholders.
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Disclosure: Herman Ng owns shares of Mapletree Industrial Trust.
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