The discussion on dividends will cover essential considerations for dividend-based investors, key strategies that can be deployed, and how to maintain discipline. The points explored below are non-exhaustive and are targeted for domestic investors who invest in Singapore-listed companies. There are no taxes on capital gains or dividends, so tax efficiency as a dividend-based investor in Singapore only applies when investing in other jurisdictions, such as the US and Europe.
The third part of this series on what to look for while investing will cover dividends. In the context of stock investing, dividends are a form of investment return, specifically realised investment income. This differs from capital gains, which can be either unrealised or realised. Capital gains are only realised when the stock is sold for a profit. It is also possible to incur losses when stocks are sold, such as when they are sold for less than the stock’s purchase price.
For dividends, it is more straightforward, where either a dividend is paid or it is not. There are no losses, and hence any dividends received are realised returns to the investor. The investor can either retain these gains or reinvest them in the stock. However, if reinvested, the dividends are no longer realised because there is a risk that the company may not continue to pay dividends.
