Your Prosperity Portfolio: Stocks That Keep Rewarding You With Dividends

Core Viewpoint - Recent volatility in gold prices highlights that even traditionally safe assets are subject to market fluctuations, prompting investors to consider a "prosperity portfolio" of dividend-paying stocks as an alternative [1] Group 1: Prosperity Portfolio Definition - A prosperity portfolio focuses on long-term compounding of a resilient income stream rather than speculation [3] - Companies included should have strong cash flow, a proven dividend payment history, and competitive advantages [3] - Investors should assess free cash flow consistency to ensure dividends are funded by operational cash rather than debt [4] Group 2: Company Analysis for Prosperity Portfolio Singapore Exchange Ltd (SGX: S68) - SGX is a blue-chip stock with a reliable dividend history, offering a 2.1% dividend yield and a payout ratio of 68% [6] - The company has increased free cash flow from S$502 million in FY2021 to S$774 million in FY2025, with a slight decrease in the first half of FY2026 [7] - SGX's high return on equity of 33.9% and low gearing ratio of 0.3 suggest dividend safety even in adverse economic conditions [8] Singapore Technologies Engineering Ltd (SGX: S63) - ST Engineering has a current dividend yield of 2.3% with potential for growth due to rising demand in its sectors [9] - The company has maintained or increased dividends from 2017 to 2024, with a special dividend of S$0.05 per share expected in 2025 [11] - Despite a weak balance sheet with S$5.5 billion in debt, ST Engineering has generated positive free cash flow consistently, reaching S$1.2 billion in 2024 [13] Sembcorp Industries Ltd (SGX: U96) - Sembcorp offers the highest dividend yield at 4.1%, with dividends increasing from S$0.04 in 2020 to S$0.23 in 2024 [14] - The company recently acquired Alinta Energy, which is expected to enhance earnings despite taking on S$6.1 billion in debt [16] - Sembcorp has generated an average annual free cash flow of S$1.5 billion from 2020 to 2024, with a 42% YoY increase in free cash flow to S$1.3 billion in the first half of 2025 [17] Group 3: Portfolio Construction Guidelines - Diversification across sectors is crucial to avoid concentration risk, with selections spanning finance, defense, and energy [18] - While higher dividend yields are attractive, caution is advised as they may indicate unsustainable dividends [18] - Reinvesting dividends is recommended to compound returns over time, contributing to long-term financial independence [19]