STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years

It has been said that you cannot go wrong buying the big 3 Singapore banks. Have they been good investments for you?

STI ETF

The best way to compare them is to compare versus the STI ETF. The STI exchange traded fund invests in a basket of Singapore blue chip stocks on Singapore’s main board. The largest constituents is of course Singtel and the 3 big banks.

STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20sti%20etf%20chart

I wasn’t able to find a good chart of the STI etf, so I got this off the factsheet. Singapore did really well since the 2001 recession and you will not be disappointed with the returns.

STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20sti%20etf%20total%20return

(click to view larger chart)

I use my SGX Singapore Stocks Factsheet to calculate what would happen if a guy invests since 2001-2002 and what is his total returns is like [view my full spreadsheet here >>]

The total annualized return is 9%. Of the 121% returns 38% of the returns come from dividends.

The yield on cost started at 3% in 2003. After 9 years it climbed to 4.6% in 2011. Notice that at one point yield on cost was 7%! but the payouts got reduced as overall the underlying stocks paid out less.

DBS Bank

STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20dbs%20chart

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It would be great if you can offload DBS at a high of 25 bucks. you would have made 100% capital gains. The 2009 bear made a very compelling buy.

STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20dbs%20bank%20total%20return

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The gains if you kept it is not much. But the dividends far outweighs the gains. A total return of 51% for an annualize 4.7% return. Half that of the STI. The dividends made up 77% of the gains.

DBS started off with a yield on cost of 3.2%. After 9 years its dividend yield climbed to 5% on an average.

UOB Bank

STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20uob%20chart

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STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20uob%20total%20return

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UOB bank turned in a better overall return of 94%. Annualized the return is roughly 6.8% over 10 years. Of the 94% returns, dividends make up 57% of the returns.

Dividend payouts are not very consistent initially. But your 3% yield on cost in 2002 would have become 4.5% in 2011. Not as much as OCBC.

Do note that UOB did issue 100 UOL shares for 1000 UOB shares owned in 2005. That makes a hell of an investment considering UOL is at 5 bucks ++ now

OCBC Bank

STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20ocbc%20chart

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Do not be spook by the large drop. that is due to a 2 for 1 stock split.

STI ETF, DBS Bank, UOB Bank and OCBC Bank total stock market returns for past 9 years 20120402%20ocbc%20total%20return

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OCBC turned out to be the best performer of the lot. a total return of 121% gain matches close to the STI ETF

Annualized gain is 9.2%. Of the 121% gain, dividend made up 45% of the gain.

Notice that the dividend payouts have been slowly rising. Recent trends have show that payouts are far more consistent. Your 1.6% yield on cost turns to 5.6% after 9 years.

Conclusion

Is there a compelling reason to invest in Singapore banks? From the looks of it, Since STI ETF largely comprises of the 3 banks it would have been a better investment. You don’t know which one of them will turned out to be the winner so why not just buy all of them. You get a boost from the smaller stocks as well.

The volatility over the years have been big as well. For a risk adverse investor you would say the banks will always be around, but I do find STI ETF to be more compelling.

One thing to note is that dividend make up a significant portion of the returns. When investing for the long haul do take that into consideration.

What say you? Am I missing out something the banks have over an ETF?

To get started with dividend investing, start by bookmarking my Dividend Stock Tracker which shows the prevailing yields of blue chip dividend stocks, utilities, REITs updated nightly.

Make use of the free Stock Portfolio Tracker to track your dividend stock by transactions to show your total returns.

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