To The Moon

Special Promotion: Receive up to S$50* Cash Coupon when you subscribe to the UOBAM Ping An FTSE ASEAN Dividend Index ETF. Find out more HERE.

Investors in Singapore don’t have to look far for income opportunities. The Singapore Exchange (SGX) is home to a wide range of dividend-paying ETFs covering assets such as bonds, real estate investment trusts (REITs) and dividend-paying stocks. Whether you’re looking for stability, higher yields, or long‑term growth, there’s likely an ETF listed on the SGX that matches what you need.

This variety is important because income investing isn’t one‑size‑fits‑all. Each asset class behaves differently, especially across different interest rate environments and market cycles.

Which ETF type should investors choose?

The choice ultimately depends on your investment goals:

• Bond ETFs typically appeal to investors who want steady, predictable payouts with relatively lower risk

• REIT ETFs offer higher yields and exposure to property markets, but they can be more vulnerable to interest rate changes

• Dividend ETFs provide access to dividend-paying companies, offering a mix of income and long-term growth potential

For investors seeking a blend of income, resilience, and long‑term appreciation, dividend ETFs may be a good place to start.

Dividend-paying companies tend to be stable businesses with resilient cash flows, which helps to support regular dividend payouts. They also offer the potential for earnings growth, which can translate into rising dividends over time. And while dividend stocks can still be affected by interest rate fluctuations, their returns are driven not just by yields but also by business growth, making them generally less interest rate sensitive than bonds and REITs.

How to pick the right dividend ETF

If you’ve decided that dividend ETFs deserve a place in your portfolio, the next step is knowing how to choose the right one. Different ETFs use different strategies, and understanding these differences can help you make a more confident choice.

Here are the main factors to consider:

1. What’s the ETF strategy?

Before you invest in a dividend ETF, look into how it selects its holdings and what safeguards it uses to ensure quality. Such information can usually be found on the ETF’s website or in its prospectus.

Common selection criteria include:

Dividend yield

Some ETFs chase the highest-yielding stocks in their universe. While that sounds appealing, a high yield can sometimes be a red flag if it is caused by falling share prices rather than strong fundamentals.

For instance, a stock priced at $30 and paying a $1 dividend has a yield of 3.3 percent ($1 ÷ $30). If the price drops to $20 but the dividend stays the same, the yield jumps to 5 percent. That looks great on paper, but the price decline may signal underlying weakness in the company’s business, which could eventually cause the dividend to be cut or suspended altogether.

Dividend growth

Other ETFs focus on companies with a proven track record of consistently paying, or even increasing, dividends over time. These businesses tend to be financially sound and resilient, offering investors more stable income through market cycles.

Dividend sustainability

Beyond yield and growth, dividend durability matters too. Certain ETFs apply filters to avoid “dividend traps”, which are companies with unsustainably high yields or high yields caused by declining share prices.

Bottom line: A high yield looks good on paper, but an ETF that pairs it with growth and sustainability criteria gives you a better chance of owning companies that can deliver consistent income over the long term.

Example: The UOBAM Ping An FTSE ASEAN Dividend Index ETF (SGX: UPD, UPU) aims to pay dividends of at least 6 percent per annum in 2026 and 20271. It focuses on companies with a consistent track record of dividend payouts and applies strict quality screens to exclude companies with unsustainable yields, negative returns that signal financial stress, or high yields driven by falling share prices. These measures help investors gain exposure to dividend payers with a stronger likelihood of delivering stable income over time.

2. How are holdings weighted?

The weight of each stock in an ETF determines how much influence it has on the fund’s performance. Understanding the index methodology is key to knowing how your ETF is constructed.

Common weighting methods include:

• Market cap weighting: Larger companies are given higher weights in the portfolio. This can help reduce volatility but may limit exposure to smaller, potentially higher-growth firms.

• Equal weighting: Every stock gets the same weight in the portfolio, enhancing diversification but sometimes reducing exposure to market leaders.

• Yield weighting: Stocks with higher dividend yields receive larger weights. This approach is attractive for income investors because it prioritises companies that deliver strong cash payouts. The flip side is that it can lead to overweighting companies whose yields spike because their prices have fallen.

Bottom line: Each method has its pros and cons. Market cap weighting offers stability, equal weighting promotes diversification, and yield weighting can boost income potential, especially when combined with safeguards to avoid overconcentration in any single stock or sector. Ultimately, the goal is to select a dividend ETF whose weighting approach aligns with your investment objectives.

Example: The UOBAM Ping An FTSE ASEAN Dividend Index ETF uses a yield-weighting methodology designed to achieve twice the dividend yield of the FTSE ASEAN Index. It also caps single-stock weights at 10 percent to reduce concentration risk, ensuring a balance between attractive income and portfolio stability.

3. How diversified is the ETF?

Dividend ETFs listed on the SGX often lean towards sectors such as financials, telecommunications, or utilities, as these industries naturally generate higher dividends. In fact, there are SGX‑listed dividend ETFs that focus solely on a single sector, such as financials. While sector‑focused ETFs can offer attractive yields and targeted exposure, investors should note that they often come with higher concentration risk.

Geographical diversification also plays an important role. ETFs focused on a single country can experience sharp swings during local downturns. Regional ETFs, on the other hand, offer exposure to multiple markets, providing a buffer against country-specific risks. They also tap into different growth drivers across the region, allowing investors to benefit from a broader range of opportunities instead of relying on a single economy.

Bottom line: A well-diversified ETF reduces reliance on any one sector or market, enhancing resilience across different economic cycles. If you opt for a single-sector or country ETF, consider balancing it with broader regional or global ETFs to mitigate concentration risk.

Example: The UOBAM Ping An FTSE ASEAN Dividend Index ETF offers both sector and geographical diversification. It invests across five key ASEAN markets and includes not just financials, but also telecommunications, utilities, and energy. Its index methodology excludes REITs, reducing sensitivity to interest rate movements and ensuring income is sourced from a broad mix of dividend‑paying stocks.

Note: The UOBAM Ping An FTSE ASEAN Dividend ETF tracks the FTSE ASEAN ex REITs Target Dividend Index | Source: FTSE Russell as at 28 November 2025. The FTSE ASEAN ex REITs Target Dividend Index was launched on 3 October 2025.

Final thoughts

Dividend ETFs can be a powerful way to build steady income while still participating in long-term growth. Choosing one doesn’t have to be complicated. Once you understand how an ETF selects its stocks, weights its holdings, and manages diversification, you’ll be in a stronger position to pick a dividend ETF that fits your income needs and long-term goals.

1: Distributions (in SGD) are not guaranteed. Distributions may be made out of income, capital gains and/or capital. This relates to the disclosed distribution policy as set out in the Fund’s prospectus.

If you are interested in investment opportunities related to the theme covered in this article, here is a UOB Asset Management fund to consider:

Fund Website

Special Promotion: Receive up to S$50* Cash Coupon when you subscribe to the UOBAM Ping An FTSE ASEAN Dividend Index ETF. Find out more HERE.

You may wish to seek advice from a financial adviser before making a commitment to invest in the above fund, and in the event that you choose not to do so, you should consider carefully whether the fund is suitable for you.

Please refer to uobam.com.sg/awards for the latest list of UOBAM awards.

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