Strategy (UOB KH)

Strategy: UOB Kay Hian did an analysis of fundamentals for dividend yield stocks ahead of reversing yield compression. On this basis, house likes SingTel and SATS. Negatively impacted stocks are SIA Eng and StarHub.

High yielding stocks have done well. Since the Global Financial Crisis (GFC) in 2008, an abnormally low interest rate environment has prevailed. This resulted in outperformance of high dividend yield stocks as yield compression set in.

Despite concerns over the potential reversal of yield compression, house believes selected yield stocks will remain favoured. Hence, even with an expected rise in interest rates, UOBKH thinks investors should still maintain selected high dividend stocks in their portfolio for steady returns.

Also, yield stocks with solid growth prospects will also be better positioned to mitigate rising rates. Risk adverse investors could opt for dividend stocks that are less correlated with interest rates. This includes SingTel and SATS, which are its top dividend yield picks.

Another low beta but safe alternative is SPH.