Learn To Invest: Dividend Investing

Over decades, this process builds up an increasing stream of passive income that you can potentially enjoy in your retirement years.

Over decades, this process builds up an increasing stream of passive income that you can potentially enjoy in your retirement years.

In Singapore, there are many reasons investors are interested in dividend investing.

Why, you may ask?

Singapore is a tax haven. Singapore does not tax capital gains or have any dividend withholding tax.  

This means everything you earn from stocks be it through capital appreciation or dividends, will not be taxed!

Why is Dividend Investing attractive?

Remember when people always mention – passive income. 

Dividend Investing is one way you can generate passive income through dividends. You can sit back, relax and have a steady stream of cash flowing into your bank account.

When you reach the age where you are into wealth preservation, dividend investing certainly appeals to you. Furthermore, these dividends can double up as a supplement to your regular job. Or even for your necessities. 

Key Terms of Dividend Investing

There are certainly a couple of key terms you may frequently hear if you are new to Dividend Investing. They are as follows:

1. Ex-Dividend Date

The ex-dividend date is usually set one business day before the record date. If you purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the dividend date, you get the dividend.

dividend investing dates

So if you were to purchase the stock on 18/11/2022, would you be eligible for the dividend?

Simple Answer: No.

2. Payable Date

The payable date refers to the date that any declared stock dividends are due to be paid to shareholders of record as of the ex-dividend date. Hence, Investors who purchased their stock before the ex-dividend date are eligible to receive dividends on the payable date.

dividend investing dates

So, if we have purchased the stock on the 17/11/2022 or before, we will receive the dividend on the payable date – 02/12/2022

3. Dividend Payout Ratio (POR)

The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company.

REITs are required by law to distribute more than 90% of the earnings in the form of dividends to enjoy tax transparency treatment by IRAS.

4. Dividend Yield

Another way to determine investment income is through dividend yield. 

Thus, dividend yield represents the ratio of a company’s current annual dividend compared to its current share price.

Singapore REITs are an attractive option for those looking for a medium-to-long term product that provides stable returns, high dividend yields and the potential to earn capital gains.

In 2021, S-REITs had an average dividend yield of 6.1%. This is approximately 400 basis points (4%) above the yields you would get from Singapore Savings Bond (SSB), and far outweighs the interest from fixed deposits and savings accounts at the banks.

Here’s how Singapore REITs compare to other asset classes:

asset classes yield
Source: SGX Research

5. Frequency Of Payments

Frequency of payments vary from  company to company.

Some could be monthly, quarterly, semi-annually or even annually.

For the most part, before each dividend is given, dividends have to be approved by the company’s board of directors. The company will then announce when the dividend will be paid, the amount of the dividend, and the ex-dividend date.

Our Stand

The most important thing about dividend investing is the power of compounding.

If you were to reinvest all of your dividends back into the same companies, you can harness the power of compounding. With that, your stake grows over time, thus dividends will also increase in tandem.

Over years and decades, this process builds up an increasing stream of passive income that you can potentially enjoy in your retirement years.

If you are keen, check out our other latest articles. Trust Bank Referral, Best Standard Chartered Cashback deals and How to choose the best brokerage for you and your investments 

Disclaimer: The information provided by LearnToInvest serves as an educational piece and is not intended to be personalized investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock.

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