Jul 24, 2013

Cory Diary : Dividend Play

I have been struggling recently on my investment portfolio even though this half year i have relatively good returns. In a recent survey, Singaporeans are found to be more negative than most other nations and this is despite our wealth. So don't fault me ! I am Singaporean after all. :)

With rising rate assumption, theoretically we should see lower yield with increasing leverage. Clearly the tide is working against dividend play. If we are thinking about bond in such scenario, the timing cannot be worst.
And Index ETF is near high.What if identifying growth stock or trading is not our cup of tea. Property yields are not much attractive either and pose to go lower with rising cost. Investor hands are limited with rising inflation.

If we are to look at high dividend counter from Reits which give 6-8% yield, a year wait at the sideline will mean opportunity cost (less Bank fixed Deposit ~0.5-1.0%) around 5-7%. If we think the stock price will not reduce by this amount assuming rate does rise, it maybe worth to invest. In the event rate does not rise or not impact as much, we may have additional buffer to build on year after year. This cumulative buffer increase on longer term will work in our favor even if we encounter crisis in later years assuming the reits are properly managed.

Another area to look at maybe Preference shares. They do come with some risk especially non-cumulative version. I will likely limit myself to Bank PS which give 4-5% if we do not mind the 6-7% premium ! Will this be the final few window of opportunities for me or should I park my fund in Government Bond and wait it out for the next crash which may take a long while to happen ?


Cory
24th July'13

2 comments:

  1. CMA 2.15% retail bonds... Almost same as govt bonds?

    ReplyDelete
  2. I am not tracking govt bond. However 2.15% yield is too low a risk and opportunity cost to put in retail bond imo.

    Below the link i found. You are probably right !
    https://secure.sgs.gov.sg/fdanet/BondPricesAndYields.aspx

    ReplyDelete