Best Undervalued Stocks in Singapore That Pays High Dividend in 2024 (Updated)

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Dividend investing is simple to start but hard to master. Each investors have their own investing style and their own preference.

One such dividend investing style is to identify undervalue stocks that pays dividend income. These dividend paying stocks offers the investors the benefit of getting a regular dividend income as well as the opportunity of getting a capital gain from the appreciation of the stock price in the future.

Here we are going to look into a list of stocks that offers relatively reasonable dividend which are also potentially undervalued shares.

Best Undervalued Singapore Dividend Stocks to Buy on SGX

Looking through the list of dividend stocks in Singapore, there are always a few familiar names. And sometimes, you may even see a few Singapore blue chip stocks in the mix.

About The List of Best Undervalued Stocks in Singapore

If you are observant enough, you may realized that we are focusing on finding stocks with a low PE ratio.

Basically, what we are seeing right now are some of the best low PE high dividend stocks in Singapore.

However, PE and dividend yield alone should not be your only focus, other than understanding the company’s business, there are many things you need to look out for as well.

Personally, I have a few more selection criteria when picking my potential undervalued dividend stocks, and we are going to go through each of the criteria below.

Criteria For Selecting Undervalued Stocks in Singapore

With this list of undervalued high dividend yield stocks, here are a few criteria I have set to find the best potentially undervalued dividend-paying stocks on the Singapore Stock Exchange (SGX).

Having said that, I am using the term undervalue here pretty loosely, as there are many ways that people use to determine the value of a stocks. The few that are most common are:

• Price-to-earnings ratio (P/E)
• Price/earnings-to-growth ratio (PEG)
• Price-to-book ratio (P/B)
• Free cash flow (FCF)

Here, the method I use to determine if the stock is “undervalued” or “overvalued” is using the PE Ratio, the reason is because it is the simplest to understand and the most popular valuation metric used by most investors.

Market Capitalization

Market Capitalization or generally referred as Market cap talks about the size of the company itself. There are various size of a company going from the smaller once which is also called the penny stocks to the bigger once which are often called the blue chip stocks.

Generally stocks are separated to a few different types of market caps:

• Large Cap
• Mid Cap
• Small Cap

Personally, when screening for stocks, I will choose companies with a market cap of at least $100 Million and it is especially true for SGX listed stocks.

The reasons are simple:

• Companies with $100 mil Market Cap is generally big enough for enough liquidity for the average investors with an average portfolio.
• The criteria is flexible enough for us to include many of the smaller but great companies.

Criteria: More than $100 Mill Market Cap

Low PE Ratio

PE ratio stands for Price to Earning ratio. It is the most common ratio use to measure “how expensive” is an investment.

Higher PE will usually will mean more expensive, and a lower PE will mean it is more cheap. Where there are many types of valuation metric, this is the simplest and most popular.

The average PE Ratio is around 20 to 25, however since we are looking for dividend stocks with low PE, I will looking into stocks that have a less than 15 PE ratio.

The reasons why I choose a PE of 15 as my cut off is due to the following reasons:

• The average PE ratio is generally accepted as 20-25, thus a low PE should be something that is significantly lower, but not too low that it becomes unreasonable.
• A PE Ratio of 15 is low enough for finding those companies which are generally considered cheap, but not too low that limit our options of stocks to consider.

Criteria: Less than 15 PE Ratio

Debt to Equity Ratio

Debt-to-Equity Ratio or the DE ratio is a great way to determine if a company is able to fulfil their debt obligation. Lower number is better and it means the company is not too overburden in debt.

Personally, as an dividend investor, I will like companies with a more manageable debt, a DE ratio of less than 30% or 0.3 DE ratio is probably preferred.

Reason why I choose 0.3 DE Ratio for my cutoff is due to these following reasons:

• While lower is better, business generally requires some form of debt to operate, and 0.3 DE Ratio generally remove all those which are overly leveraged.
• 0.3 DE ratio offers us a wider options of stocks to work on where it can be quite important as we have a few criteria to check before we look into other areas like MOAT which cannot be easily qualified or assessed.

Criteria: Less than 30% or 0.3 DE Ratio

Dividend Yield

Dividend yield is talking about how much dividend you will possibly get from investing in the particular stocks. Oftentimes, higher is better, but when the potential dividend yield gets too high, you need to be very careful and probably look into the company more to understand the reasons why and ask if it is really sustainable.

For the dividend yield I will choose more than 2.5% because it is the same rate of return from an “risk-free” investment such as our CPF.

Criteria: More than 2.5% Dividend Yield

Return-On-Equity

Return-On-Equity also called the ROE, helps to measure how effect is the management in helping you as the shareholders to grow your money.

A higher ROE is always preferred, and a negative (-ve) ROE is always a warning sign of a bad business with bad management team.

I personally will like to have an ROE of at least 10% or more, the reason is simple:

• Choosing stocks that have more than 10% ROE generally helps you removed 80% of the bad companies, leaving you with only 20% of the good companies to work on. Pareto Principle or more commonly known as 80/20 rule is a great way to be more efficient in picking stocks.
• Companies with ROE of 10% or more generally have a good business with a good management team.

Criteria: More than 10% ROE

Which Undervalued High Dividend Yield Stocks Should You Buy in The Singapore Stock Market?

Regardless if you are investing in Singapore stocks that is listed on the Singapore exchange or any other stocks. Learning how invest is not as straightforward as doing a quick filter and buy whatever you see in the list.

While you may have found some great opportunity to buy undervalued stocks in Singapore that have great growth potential and even possibly increasing in their annual dividend for the next few years.

Investing in stocks is not always so straightforward.

While I’ve been investing in many stocks listed on the Singapore Stock Exchange, and other exchanges for many years, sometime investing is more of an art than a science. You’ll need to look into a few things such as:

• Fundamental analysis of the stocks according to your criteria.
• Moat analysis of the company to know if the company is really good.

These are just some minimum you need to understand before you can make a decision.

When investing, understand that you are investing in a company and not just buying stocks.

However, understanding that if you are looking to create your dividend investing portfolio with a long-term approach and you will have a much higher chance of profiting from your investment and create a passive income from your dividend portfolio.

Regardless, you’ll need a good brokerage account to help you in your research, analysis, buy and sell stock as well as monitoring your portfolio. Here are a few brokerage you can consider to get started.

Brokerage

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BEST FOR:  Beginner Retail Investors and Professional Traders Looking For All-In-One Trading App to Invest in SG, US, HK and China.

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securely through Moomoo’s website

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Disclaimer: I may or may not have invest in any of them, what’s listed here is only for entertainment purpose only and it should never be used as any form of investment advice. This is my diary on my stock analysis, while I’ve been investing for +15 years, I am still learning. I wish to share what I learn during my investment journey so you may learn from both my success and mistakes. Enjoy!

• Dividend Investing Singapore: Complete Beginners Investor Guide
• Best Undervalued Stocks in Singapore That Pays High Dividend in 2024 (Updated)
• Price to Sales Ratio (P/S Ratio): Investor’s Guide to Valuation Metrics When Profit is Absent
• Price to Earning Ratio: Dividend Investor’s Essential Metric to Know
• 3 Best Singapore Bank Stocks To Buy Now For High Dividend Yield in 2024 (Updated)

Antony C.

Founder & Financial Writer at Income Buddies | Website | Posts by Author

Antony C. is a dividend investor with over 15+ years of investing experience. He’s also the book author of “Start Small, Dream Big“, certified PMP® holder and founder of IncomeBuddies.com (IB). At IB, he share his personal journey and expertise on growing passive income through dividend investing and building online business. Antony has been featured in global news outlet including Yahoo Finance, Nasdaq and Non Fiction Author Association (NFAA).

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