Singapore Savings Bonds SBJUL20 GX20070W is 0.8%

SBJUL20 GX20070W

The effective interest rate for July 2020 Singapore Savings Bonds (SBJUL20 GX20070W) is 0.80% if you held it for 10 years. This is the lowest interest rate since inception of the Singapore Savings Bonds. As you can see from the chart above, the interest rate has been on the decline. The COVID-19 pandemic that started in March 2020 had caused the interest rate to fall dramatically.

The minimum amount you can purchase for Singapore Savings Bonds is S$500. If you decide to hold and sell it for 1 year, the effective interest rate is 0.3%.

There are alternative financial instruments out there that offer higher interest rates. They are short term endowment plans such as Tiq 3 Year Endowment Plan and China Taiping i-Save Plan which offers an interest rate of 2.10% p.a. and 2.18% p.a. respectively.

The latest attractive financial instrument that I have signed up for is Singlife Account that offers you an attractive interest rate of 2.5% p.a. Singlife Account is an insurance savings plan. There is no lock in period, no monthly fees and you can withdraw your money anytime.

Singtel Slashes Final Dividends

Singtel currently makes up 2.38% of my stock portfolio. The telco had announced their 4Q2019 financial results on 28th May 2020. The underlying net profit was down 13% to S$2.46 billion due mainly to weakness in Australia. The weakness in Australia was due to continuing data price competition and weak consumer sentiment, and the effects of lower equipment sales and margins and low NBN resale margins.

In consideration of Airtel’s exceptional charges of S$1.80 billion, the net profit declined by 65% to S$1.08 billion as compared to S$3.10 billion a year ago. The exceptional charges refer to regulatory costs, including the adjusted gross revenue matter and a one-time spectrum charge. Singtel took a net exceptional charge of S$302 million this quarter, mainly arising from Airtel’s provision for the spectrum charge.

Operating revenue for the full year also declined 2% in constant currency terms at S$16.54 billion, a result of lower mobile service revenue and equipment sales, aggravated by the onset of COVID-19.

Debt

Singtel’s group net debt stood at S$12.50 billion including S$2.1 billion of lease liabilities recognised under the new accounting standards. I believe free cash flow is something investors are concern about. The good news is that free cash flow rose 4% to S$3.78 billion for the full year with the impact of changes in accounting standards, positive working capital and lower tax payments.

Dividends

I have bought into Singtel for its consistent payout of dividends. Singtel had announced a final dividend of 5.45 cents. The total dividends paid in FY2020 is 12.25 cents as compared to 17.5 cents paid in FY2019. This is a 30% reduction in dividends.

Based on the current share price of S$2.53 and FY20 dividend payout of 12.25 cents, this translate to a current dividend yield of 4.84%.

Singtel Share Price

Summary

The outlook for Singtel remains weak due to stiff competition from other Telcos in different countries. Even though Singtel has won the 5G spectrum, my opinion is unless there is some value gained out of 5G spectrum, this can hardly translate into profits for Singtel. This is not to mention about the capital expenditure required into developing the infrastructure for thhe 5G network.

I am not too concern about the weak share price of Singtel as it only makes up a minority of my stock portfolio. The catalyst for Singtel comes from its regional associates. Since the COVID-19 pandemic has impacted businesses across the globe, the regional associates are impacted as well in a way or another. Meanwhile, I shall hold on to Singtel in view of the day it regains its glory in terms of dividend payout.

Stock Transactions for May 2020

My Stock Portfolio (May 2020)

The month of May 2020 is gone at the blink of an eye. During the end of each month, I will provide a summary of the stock transactions or actions that I have made for that month. Since April, I have stopped purchasing Singapore Savings Bonds as the interest rates had fallen to unattractive levels. The interest rate is only 1.05% for holding the bond for 10 years.

High Yield Low Risk

Not to worry, I have found a better place to deposit your money, which is the Singlife Account. The best thing I like about the Singlife Account is that it delivers a return of 2.5% per annum for the first S$10,000 deposited.

The interests collected goes back to my CIMB FastSaver account.

Stock Investments

I did not make any stock transactions this month. As the stock market stages its recovery, I am slowly building back my cash on hand too. During the stock market crash, I have deployed some funds to add a few quality stocks to my stock portfolio. I am glad the stock prices have since recovered and I shall monitor their performance before increasing my position on them.

The stock market can remain volatile as the COVID-19 pandemic has re-ignite the argument between the two big countries. With Beijing imposing new national security laws on Hong Kong, this has shaken the stock market as well. A few financial bloggers such as Brian (A Path to Forever Financial Freedom) took opportunity to load up on their favourite stocks. What I am trying to say here is that even if you missed out to buy stocks at incredibably low prices during the COVID-19 pandemic stock market crash, there are always more opportunities ahead.

Cryptocurrency

The very last thing I wish to update here is the MCO card. I have signed up for the Ruby Steel (Red) MCO card. I am still waiting for the card to arrive. If you sign up using my MCO referral link, you and myself will receive US$50 in the form of MCO token.