To The Moon

With the global rate-cut cycle and the Monetary Authority of Singapore’s SGD 5 billion Equities Market Development Plan (EQDP) jointly supporting the market, Singapore equities are expected to continue seeing valuation re-rating and earnings expansion in 2026.

CGS International forecasts that Singapore-listed companies’ net profit could grow 8.5% YoY in 2026, while market liquidity is set to improve significantly. Against this backdrop, we highlight three blue-chip stocks offering both attractive dividends and growth potential, along with three fundamentally solid S-REITs, giving investors a clear roadmap for positioning into 2026.

I. 2026 Market Outlook: Three Key Themes Driving Structural Opportunities

CGS International maintains a positive view on the Singapore market for 2026 and identifies three core investment themes:

• EQDP beneficiaries: The SGD 5 billion market development plan will directly boost liquidity and broaden participation from local and international investors.

• M&A and restructuring opportunities: Valuation re-rating across sectors will catalyze consolidation and corporate restructuring.

• “Undervalued dark horses”: Low-attention, lagging sectors may experience valuation recovery.

Sector-wise, the report recommends overweighting agriculture conglomerates, capital goods, construction, gaming, healthcare, internet services, REITs, and telecommunications. The real estate sector receives an upgrade to “Overweight” due to significant valuation discounts.

II. Three Core High-Dividend Stocks: Dividend Compounding + Capital Appreciation

1. $SGX(S68.SI)$ — A Dividend Compounder and Growth Engine

As Singapore’s only approved exchange operator, SGX benefits from diversified revenue streams spanning trading, clearing, and market data—allowing stable dividends across cycles.

Key Highlights:

• 24 years of uninterrupted dividends: Continuous payouts since 2001, through the financial crisis, pandemic, and inflation cycles.

• Strong profitability: FY2025 net revenue rose 11.7% YoY to SGD 1.3 billion; adjusted net profit jumped 15.9% to SGD 610 million with a net margin of 47%.

• Consistent dividend increases: FY2025 total dividend grew 9% YoY to SGD 0.375, implying a 2.2% yield and 59.7% payout ratio.

• Sustainable growth: Expansion of derivatives, launch of environmental/FX products, and ETF innovation continue to drive growth.

Investment Case: SGX uniquely combines defensiveness and growth, making it a prime long-term core holding.

2. $DBS(D05.SI)$ — Balancing Growth and Dividend Strength

DBS, Singapore’s largest bank, has leveraged digital transformation and fee-income diversification to deliver balanced growth in net-interest and non-interest income.

Key Highlights:

• Strong earnings: Q3 2025 net profit reached SGD 2.95 billion.

• Explosive fee income: Total fee income grew 20% YoY to SGD 1.58 billion. Wealth management surged 30.7% to SGD 796 million—half of total fee income.

• Leading dividend payout: Total dividend of SGD 0.75 per share (ordinary + special) implies a 5.43% yield—higher than OCBC (4.37%) and UOB (5.15%).

• Solid capital strength: NPL ratio stable at 1.0%; CET1 ratio at 15.1%.

• Regional expansion: Further growth expected from Southeast Asia penetration and fee-income scaling.

Investment Case: Despite trading at 2.2x book value, DBS’s market leadership and superior ROE justify the premium.

3. $ST Engineering(S63.SI)$ — A Steady Dividend Payer in Engineering

ST Engineering’s diversified exposure to aerospace, defense and public security, and smart city solutions gives strong earnings visibility backed by a large orderbook.

Key Highlights:

• Robust orderbook: SGD 14 billion in new contracts in the first nine months of 2025 (+69% YoY). Total orderbook reached SGD 32.6 billion—about three years of revenue coverage.

• Steady topline growth: Revenue for the period rose 9% YoY to SGD 9.06 billion.

• Growing dividends: FY2025 DPS at SGD 0.18 (2.2% yield) plus an additional special dividend of SGD 0.05.

• Deleveraging progress: Asset divestments used to reduce high leverage (debt-to-equity >2.0x).

Investment Case: Multi-year contracts and diversified businesses support stable performance. Defense orders, aviation MRO recovery, and smart-city segment improvement will drive future growth.

III. Three Selected S-REITs: High Yield + Clear Growth Visibility

1. $Lendlease Reit(JYEU.SI)$ ) — A Beneficiary of Tourism Recovery

Portfolio breakdown: 89% in Singapore’s JEM and 313@somerset; 11% in Milan, Italy; total valuation SGD 3.76 billion.

Investment Highlights:

• Strong operating metrics: FY2025 Q2 NPI +2.7% YoY; distributable income +4.8%; DPU +1.8% to SGD 0.018.

• Momentum continues into Q1 2026: Occupancy 95%; rental reversions +8.9% (retail) and +1.7% (office); WALE 7.0 years.

• Lower financing costs: Average debt cost reduced to 3.09% from 3.46%; gearing fell to 35% after divesting JEM office.

• Attractive valuation: P/B 0.83x and yield ~5%, indicating undervaluation.

• Catalysts: Stable economy, improving leasing conditions, potential for special distributions via non-core asset sales.

2. $NTT DC REIT USD(NTDU.SI)$ — Pure Data-Center High-Yield Play

Listed on July 14, 2025, offering rare exposure to global data-center assets.

Key Highlights:

• Outperforming IPO forecasts: 1H FY2026 NPI, distributable income, and DPU exceeded projections by 1.7%–3.3%.

• Global footprint: USD 1.5 billion portfolio across the US (64.7%), Europe (18.1%), and Singapore (17.3%), with 95.1% occupancy, 4.4-year WALE, and 5.1% rental reversion.

• Strong financials: Gearing 32.5%, interest coverage 4.1x; 70% of debt fixed or hedged; average cost 3.9%.

• Sector-leading yield: Annualized DPU implies a high 7.82% yield—largest among Singapore data-center REITs.

• Catalysts: Structural demand for data centers and historically low vacancy indicate meaningful valuation re-rating potential.

3. $Cent Accom REIT(8C8U.SI)$ — A Leader in Essential Accommodation

Singapore’s first accommodation-focused REIT (PBWA + PBSA), listed Sept 25, 2025; units have risen 15.3% since IPO.

Key Highlights:

• High growth outlook: 2024 NPI surged 31.4% to SGD 112.8 million. DBS forecasts DPU of SGD 0.058 (2025) and SGD 0.069 (2026), implying a 6.1% yield.

• Rapid portfolio expansion: After acquiring Australia student housing, portfolio value rises from SGD 1.84 billion to SGD 2.12 billion; 15 properties with 27,602 beds across Singapore, UK, and Australia.

• Healthy financials: Gearing at 20.9%; post-acquisition ~31%; interest coverage 4.6x.

• Strong supply–demand dynamics:

  • Singapore PBWA: Controlled new supply + growing foreign-worker demand.

  • UK/Australia PBSA: Strong education demand + supply shortages; rent CAGR 26.3% (UK) and 11.3% (AUS) from 2022–2024; occupancy at 98% and 94%.

• Catalysts: High occupancy, rising rents, and potential acquisitions driving further DPU growth.

IV. Investment Strategy: Building a Balanced Core Portfolio

For income investors: All six counters offer stable 4–8% yields, ideal for dividend reinvestment and compounding.

For growth investors: Dividend income provides downside buffer, while earnings visibility supports total-return expansion.

Allocation Strategy:

• Core positions: $SGX(S68.SI)$ , $DBS(D05.SI)$ , $ST Engineering(S63.SI)$

• Satellite positions: $Lendlease Reit(JYEU.SI)$ , $NTT DC REIT USD(NTDU.SI)$, CAREIT

• Risk management: Blue chips offer defensiveness; REITs offer high yields but require monitoring of interest-rate and FX risks (especially NTT DC REIT).

Conclusion

Singapore’s 2026 market is poised for a “double engine” of liquidity improvement and earnings recovery. These six stocks embody the principle that dividends and growth are not mutually exclusive, serving as essential tools for long-term wealth accumulation.

Investors should avoid binary thinking and instead combine quality dividend stocks with strong S-REITs to secure stable returns in an uncertain market.

👉 Do you have any SGX stocks that you particularly like or have been following for a long time? Feel free to share them in the comments section!

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