Cory Diary : Misconceptions of Dividend Investing

From experiences that I had so far, here's the collection that one should watch out or be reminded on the misconception of Dividend Investing.

1. Yield is Everything

This cannot be right. If Yield is all that's matter, investment of such can be automated to the highest yield and nothing left for other lower risk assets. Does this make sense ? Money where got so easy to earn. Want to gamble, go Casino better because better odds !

In reality, one needs to filter out High Risk from the portfolio before allocation of different other risk levels before yield. As you notice, I do not have EHT, Lippo in my portfolio. High Risk Reits are a Time Bomb. Is a matter of when.

First Reit is managed out from the portfolio in Year 2019 with cut loss at 0.945 when the risk is not worth to hold. And that is at a year where the Portfolio has a Record Profit of 20% XIRR. A mindset of never ever feel rich to lose money.

2. Rights are bad for dividend Investing

Any old time Reit players will tell you there is good opportunities to profit from Rights Issue. And if we are to go this dividend path, one should not be feared of Rights Issue. Is it exactly this fear that allow people to profit from you.

In solid Reits so far such as FCT, CICT, Ascendas, Mapletree etc even without subscribing to Rights does not mean your DPU will be materially impacted. Do nothing can still be ok.

3. NAV Valuation

Can be quite misleading. One recent example is First Reit where their NAV is off rental income from the property. However how is the rental derived can be from complex negotiations between the Reit Manager and the Sponsor or the Tenants where there can be consideration for other compensations that is material. This is make worst if there is credibility issue with the Sponsor who artificially jack up the property prices to the Reit they controlled.

4. Gearing

The formula for Reit is Total Debts / Total Asset. Any other formula that you read from Quarterly, Half Yearly or Annual Reports are just to communicate a better result view. Another way to give the impression of lower gearing is through Preference Shares which is not counted into debt therefore one has to be careful.

5. Capital Gains

Dividend investing doesn't mean we lose out in Capital gain or loss. While the stock price tends to come down upon ex-dividend, due to constant earning of the underlying businesses, the stock generally will fill back the gap. And with ever decreasing rate, the attractiveness of profitable businesses can push up the stock prices. But one do have to remember they aren't tech stock and should never have such mindset on their performance. Like many stocks, they also float with the market tide but with varying degrees. There will always be good and badly run Reits.

6. Cost of Debts

Ability to raise fund with lower cost makes running a company much easier. So this helps in your stock selection when we are ranking similar companies except cost of debts !

Cory

2020-1213

Cory Diary : Dividend/Interest Nov Report

We are few weeks away before the year ended and I think is a good time to update where we are on dividend this year. There are a number of Preferential Offerings, Scrips, Merge and Delist. So to put the base comparison right, distribution from merge and delist are tracked separate as the amount is quite large and won't be meaningful or sustainable annually.

Therefore for below table for Accordia is only dividend from regular distribution. Ascott Trust distribution is a little tricky which I have accorded Ascendas-h tr cash compensation in year 2020, so will be excluded from Year 2020 annual dividend as well.

Do note as investing is fun for me, some of the counter can move in and out of the portfolio in large amount as I learn the rope through experience and experiment. So table 1 is by all means a reference capture at a particular point in time while dividends being collected through out the year. 

Table 1: Dividends in % of Year 2020 Sustainable Total Dividend

This year we see some some swings in the portfolio which I think my have help net some shares before Ex-dividend positively. However, the portfolio also suffers sizeable loss of dividends due to cap on the banks. Furthermore the rebates by Retail malls reduced the dividends of the portfolio as well.

Despite all this, glad to find that by end Nov, for sustainable dividend portion, the portfolio is already way past last year annual dividends. And this is done with the portfolio in good positive returns so far.

I have also bought more Bonds this week with growing cash level. So yield wise will pull the portfolio lower but I think good balance is important. The last time I did this we encounter Covid-19 turbulence immediately after. Hopefully we don't have to go through the same experience of Mar 2020 again.

Currently still busy making sure Year 2021 will have a good chance to beat Year 2020 at risk mitigated level. Considering current cash level, beating this year achievement will not be too hard.

Cory

2020-1206

Cory Diary : Performance Nov'20

In my earlier blogging which I mentioned that it is better for me to be in the Green than to widen the lead against STI with Portfolio still in the Red. And my wishes is awarded as such by end of October. The gap final close down to 15.7% which reflects remarkable STI returns within a short span of time cutting it losses just below 13% and probably single digit after dividends. My portfolio returns almost 2.8% in the black on the last day of the month.

If we look how the year started with Covid-19 and how the bleak the situation is, many people would be surprised that we could end in the black for STI. Nothing impossible. We shall see how it performs in Dec. Currently, after a good run, there is some correction.

 

What is hindering STI is probably Vaccines solutions in which countries are rushing them out in record time. The damage to the economy specifically to the Airlines are long term even if the economy recovers. I am also a little reluctant on Hospitality as they will need to do much more to repair their balance sheets. I would think some how we need to price in Virus risk into their stock price.

As for the laggards, Retail Malls which are quite cheap for those that support daily necessity. So this are ones which I am positioning. Others possible contenders will be SBS Transit, SATS and ST Eng. There is some trading play on the Banks but it will remains a key stake as I have emptied my STI ETF.

There are also a few others like MLT and MIT which I decided to KIV unless they comes down enough to improve their yield. I really likely to own them but the situation has to be right. Maybe I will kickstart with small positions if there is further reduction in their prices as AGT has make it way out of the portfolio after the 2nd tranche has been distributed.

Lastly I am tempted to return to Sheng Siong .... except that valuation is not cheap. Perhaps I need to be more patience. 

Cory

2020-1202