In the ever-evolving landscape of the stock market, where peaks and valleys are part of the investing journey, the value of defensive stocks cannot be overstated.
These stocks offer stability and consistent returns, serving as a sturdy backbone for your investment portfolio. In this article, we delve into five defensive stocks that not only weather market turbulence but also provide a generous dividend yield of 5% or more.
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| Stock | Ticker | Dividend Yield | Sector |
|---|---|---|---|
| Kimly Limited | 1D0 | 5.25% | Consumer Cyclical |
| Mewah International Inc. | MV4 | 5.31% | Consumer Defensive |
| Keppel Infrastructure Trust | A7RU | 5.34% | Basic Materials |
| NetLink NBN Trust | CJLU | 6.13% | Communication Services |
| QAF Limited | Q01 | 6.25% | Consumer Defensive |
1. Kimly Limited (1D0) – 5.25% Dividend Yield
As Singapore’s prominent coffeeshop operator, Kimly Limited has cultivated a vast network of food outlets and stalls, overseeing a comprehensive network of 84 food outlets, 170 food stalls, 10 Tonkichi and Tenderfresh restaurants, and 4 Tenderfresh kiosks strategically dispersed across the city’s heartland areas.
Here is Kimly’s dividend payout history from the past 5 years, complied according to the respective years in which the dividends were distributed:
In the context of financial performance, Kimly navigated through challenges with remarkable resilience. In the first half of FY2023, the company reported a marginal 0.9% year-on-year decrease in revenue, amounting to S$155.5 million. This decrease was primarily attributed to lower contributions from the Food Retail Division.
However, in the face of this headwind, Kimly exhibited its ability to adapt and evolve. Despite the dip in revenue, the company managed to achieve a 0.7% year-on-year increase in net profit after tax, reaching S$18.7 million for the same period. This dynamic performance showcases Kimly’s capacity to manage challenges while maintaining a firm financial foundation.
Beyond the figures, Kimly’s defensive stock attributes are deeply entrenched in its market presence and strategic positioning. Its extensive network of outlets, especially concentrated in heartland areas, ensures a consistent stream of patrons, regardless of economic ebbs and flows.
As a provider of everyday essentials – nourishing meals and culinary delights – Kimly transcends transient market trends. While the post-pandemic landscape might witness shifts in dining preferences, Kimly’s steady revenue and profit trajectory underscore its resilience as a dependable investment option.
It’s a testament to the enduring appeal of consistent demand, and while meteoric growth might not be its hallmark, stability and reliable returns are firmly embedded in Kimly’s identity.
2. Mewah International Inc. (MV4) – 5.31% Dividend Yield
Mewah International Inc. (“Mewah”), a global food and agri-business, boasts an extensive footprint across Malaysia, Singapore, and Indonesia, with refining and processing facilities.
With over 3.5 million MT annual refining capacity, Mewah stands out in the edible oils and fats domain. Its diversified offerings include edible oil refineries, food manufacturing plants, biodiesel facilities, and dairy factories.
Mewah’s operations encompass two key segments: Bulk and Consumer Pack.
The Bulk segment focuses on bulk form vegetable-based edible oil and fat products, serving confectionery, bakery, and food production. Additionally, the segment extends to bioenergy products.
The Consumer Pack segment involves the production and sale of packaged vegetable-based edible oil and fat products, alongside dairy, soap, and rice offerings. This segment’s diversity contributes to income streams and enhanced customer engagement.
Here is Mewah International’s dividend payout history from the past 5 years, complied according to the respective years in which the dividends were distributed:
In terms of financial performance, Mewah marked an encouraging 16.6% increase in total operating margin to US$89.1 million for the first half-year period. The net profit, however, witnessed a decline of 28.4%, landing at US$10.2 million, attributed to inflationary cost pressures. Notably, the sales volume achieved notable growth, rising by 11.0% to 2,123,900 MT, albeit offset by a 21.0% reduction in revenue due to lower selling prices.
Mewah navigated through dynamic palm oil price trends, capitalizing on price spreads vis-a-vis competing vegetable oils. This contributed to the 11.0% increase in sales volume during H1 2023. The Consumer Pack segment displayed robust growth, with an 88.5% surge in operating margin, backed by a 22.6% increase in volumes.
Amidst the ever-present demand for cooking oil and FMCG products, investors should remain attentive to Mewah’s response to fluctuating average selling prices. These pricing dynamics could inevitably influence the company’s revenue and profit trajectory, making it a crucial aspect to monitor moving forward.
3. Keppel Infrastructure Trust (A7RU) – 5.34% Dividend Yield
Keppel Infrastructure Trust (KIT) is a prominent business trust traded on the Singapore Exchange, managing assets valued at approximately $7.3 billion in FY 2022.
With a diversified portfolio encompassing strategic infrastructure sectors like energy, desalination, and waste-to-energy, KIT serves a diverse clientele ranging from government agencies to multinational corporations and individual consumers.
Here is Keppel Infrastructure Trust’s dividend payout history from the past 5 years, complied according to the respective years in which the dividends were distributed:
As guided by Keppel Infrastructure Fund Management and sponsored by Keppel, a global leader in sustainable solutions across infrastructure and real estate, KIT’s 1H 2023 performance stood out impressively.
Reporting a Distributable Income of $132.9 million, which a notable 51.8% increase compared to 1H 2022, the Trust’s growth was driven by contributions from City Energy and strategic acquisitions completed in FY 2022, contributing $68.6 million or 38.5% of Asset Distributable Income for the period.
Moreover, KIT declared a higher Distribution per Unit (DPU) of 1.93 cents for 1H 2023, representing a steady 1% year-on-year increase. This DPU translates to a distribution yield of 5.34% based on KIT’s closing price of $0.48 as of 22 August 2023, indicating the Trust’s commitment to delivering consistent value to investors.
Operating on a cost-pass-through mechanism and availability-based revenue model, KIT demonstrates resilience against the backdrop of energy price fluctuations and inflation. This setup underlines its capacity to deliver dependable operational performance across its diverse portfolio.
4. NetLink NBN Trust (CJLU) – 6.13% Dividend Yield
NetLink NBN Trust (NLT) holds an undisputed monopoly over Singapore’s fiber network, serving as the backbone of the Nationwide Broadband Network (NBN).
With a robust and stable business model, NLT enjoys predictable revenue streams, supported by a solid balance sheet and strong liquidity, ensuring consistent cash flows for future investments and distributions.
Here is NetLink Trust’s dividend payout history from the past 5 years, complied according to the respective years in which the dividends were distributed:
In its recent performance update for Q1 FY24 ending June 30, 2023, NLT demonstrated resilience, reporting a 3.1% EBITDA increase and a 2.1% rise in Profit After Tax compared to the same period a year ago.
This quarter’s revenue surpassed the previous year by $6.0 million, fueled by $4.1 million from non-Regulated Asset Base (RAB) sources and $1.9 million from RAB revenue, boosted by heightened residential, non-residential, NBAP, and segment connections orders.
As seen from above, most of its revenue are recurring with the exception of installation and anchillary project. Ressidential fibre connection revenue remains the largest contributor at 59.2%. With 59.2% of revenue stemming from residential fiber connections, NLT offers dividend investors a reliable income source. Additionally, as it taps into build-to-order projects for residential expansion, the potential for consistent dividends remains strong.
Moreover, the Infocomm Media Development Authority (IMDA) is reviewing regulations that could positively impact NLT’s financial outlook. While the details are awaited, the potential benefits driven by the risk-free rate could lead to improved revenue recovery from projects.
This, in turn, might strengthen Distribution Per Unit (DPU) and the company’s share price, reinforcing NLT’s appeal as an investment opportunity.
5. QAF Limited (Q01) – 6.25% Dividend Yield
Bread is a breakfast favorite for many Singaporeans, and Gardenia, one of the most popular brands, is owned by QAF Limited. Beyond baking, QAF operates businesses in Distribution and Warehousing across the Asia-Pacific region, spanning countries like Singapore, Malaysia, Australia, and more.
Here is QAF’s dividend payout history from the past 5 years, complied according to the respective years in which the dividends were distributed:
In the first half of 2023 (1H 2023), QAF displayed a robust financial performance. Group revenue surged by 12%, reaching $301.6 million compared to $270.5 million in 1H 2022. Adjusted for currency fluctuations, this increase was even more impressive at 16% in constant currency terms. The Bakery segment also flourished, with sales climbing by 10% (or 17% when accounting for currency effects) to $216.1 million, contributing to the segment’s enhanced EBITDA.
Distribution & Warehousing, another arm of QAF’s operations, witnessed a 12% revenue growth, translating to a $8.7 million increase, bringing the total to $80.3 million in 1H 2023, driven by elevated sales to food services, export, and retail supermarkets. EBITDA for 1H 2023 experienced a parallel rise, ascending to $4.5 million, aligned with the augmented revenue.
However, seasoned investors recognize that every financial tale contains layers. While the overall financial landscape exhibited strength, it’s prudent to acknowledge a decline in Group EBITDA due to exceptional items.
This decline, a 44% dip from $23.6 million in 1H 2022 to $13.1 million in 1H 2023, was primarily attributed to a $10.0 million share of losses in a joint venture, contrasting with the $3.8 million share of profits recorded in 1H 2022.
This is an aspect that investors need to consistently keep tabs on as they move ahead.
Conclusion
We have explored 5 defensive stocks, each offering a unique way to strengthen your investment portfolio.
From Kimly’s resilient food business to NetLink’s essential internet infrastructure, QAF’s bread-making prowess, Keppel Infrastructure Trust’s diverse holdings, and Mewah’s global food presence – these companies showcase stability and potential for reliable returns.
However, before making any investment decisions, it’s crucial to conduct further research, understanding the intricacies of each company’s financials, market trends, and potential risks.
This exploration serves as a starting point, highlighting the importance of due diligence in crafting a well-informed investment strategy that aligns with your financial goals and risk tolerance.
