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6M 2015 passive income from non-REITs.

Saturday, July 18, 2015

What did I do in the non-REIT space in the first 6 months of 2015, specifically in stocks which pay dividends?

I added to my long position in Accordia Golf Trust which I initiated in late 2014. AGT's unit price fell to a level which I felt made it a fairly good investment for income. Of course, it has fallen to a lower level by now and I have been accumulating on weakness.

I added to my long positions in Hong Leong Finance and Singapura Finance (both trading at a discount to their NAVs) as I believe that a rising interest rate environment should benefit them because their NIMs should improve. Interest income forms about 80% of their total income. So, they are not as resilient as the 3 local banks but they should benefit disproportionally when interest rates are higher.

Singapura Finance

I added to my long position in Wilmar International which, if we have been following its many developments, is a bigger and more dynamic creature now than a few years ago. There are many things to like about Wilmar, including its relatively depressed stock price which incentivises me to buy more. So, I bought more when its stock price dipped slightly below its NAV earlier this year.

I added to my long position in ST Engineering which is one of the founding members of my investment portfolio. Although they will pay only 75% of their earnings as dividends instead of 100% when I first became an investor donkey years ago at $1.55 a share, it doesn't bother me. The fact that the company has grown and enlarged their footprint in the USA over the years is good news to me now with the US$ set to strengthen against the S$.

I added to my long position in SembCorp Industries and reduced exposure, both actions within 2 or 3 months of each other. For the full story, read related post at the end of this blog post. I believe that SembCorp Industries and SembCorp Marine have both hit a speed hump but I don't think they are going kaput.

SembCorp Industries

The world will still need crude oil and other products derived from crude oil. The world will still need energy. The world will still need clean water. SembCorp Industries should be more resilient than SembCorp Marine, obviously, but since I believe that they will both do well enough given time, I am willing to wait and be paid while I wait.

I also added two dividend paying stocks to my non-REIT income portfolio as their stock prices retreated from their highs: Tai Sin Electric and Starhub. For the stories, read related posts at the end of this blog post.

For the first 6 months of 2015, I received dividends and distributions from the following non-REITs:

1. SingTel
2. APTT
3. SPH
4. Croesus Retail Trust
5. OUE Limited
6. SembCorp Industries
7. SembCorp Marine
8. Wilmar
9. NeraTel
10. Hock Lian Seng
11. ST Engineering
12. Hong Leong Finance
13. Ascendas H-Trust
14. QAF
15. Accordia Golf Trust


SPH retains majority ownership of SPH Trust.



I need to remember that that Hock Lian Seng's dividend included a special dividend and it is, therefore, extraordinary. I must not think that it is going to recur although they do have a lot of cash on hand. The sale of Skywoods condominium is chugging along well enough and it is by now almost 70% sold. With a packed order book, Hock Lian Seng should continue to deliver good results in years to come.



Oops. I almost forgot.

For the first 6 months of 2015, passive income received from non-REITs is S$38,925.57 which works out to be $6,487.59 per month.

Related posts:
1. 2014 full year income from non-REITs.
2. SembCorp Industries: Partial divestment.
3. Tai Sin Electric: Nibbling for yield.
4. Starhub: A nibble at $3.85 a share.
5. Hock Lian Seng: Robust order book.
6. 6M 2015 passive income from S-REITs.
7. AK says create your own Dividend Machines.

34 comments:

jalan Jalan said...

Hi AK,

I thought you have SATS in your portfolio?

apex property investment said...

Over 80k in dividend income in 6 months??? Wow, non taxable income some more. You are good! We can all learn and do better!

AK71 said...

Hi JJ,

Yes, I do. SATS will pay dividend in August, I believe. :)

AK71 said...

Hi Apex,

I am glad if blog posts such as this inspire many more people to work towards a financially more secure and, eventually, a financially free future. It is a process that will take many years and we have to soldier on. :)

Andrew Goh said...

To have $6,000 dollars dividend a month, you must have put in a lot of capital for all the stock. How much capital you put in?

AK71 said...

Hi Andrew,

Over the years, some readers have asked me this same question or in some variation but it is not something I would answer. However, there are some readers who have been following my blog or who took the trouble to trawl my old blog posts over the years who have come up with good estimates. ;p

AK71 said...

It doesn't matter how much AK's portfolio is worth. It doesn't even matter how much AK's passive income is from stocks each year. What matters is that AK has chosen to invest for income to improve his financial health and that readers are inspired enough by AK's sharing to consider doing the same.

"A reader told me that he hopes to achieve a third of what I have achieved by the time he is my age because his circumstances are different from mine. He wants to have children and his wife stays at home. This is an important thing to remember. Our circumstances are all different from one another's.

"So, I remind readers not to be fixated with numbers.

"The important thing is that their quality of life improves. The important thing is that they feel financially more secure, year after year."


From: How to get $50K in passive income by investing in stocks?

Leonard Ng said...

AK,

Seems like Japan golf industry has been on the decline for quite a while. There seem to be more golf courses being abandoned and converted into solar power plants in Japan. Abenomics and all the monetary stimulus doesn't seem to be doing much for the economy....except weakening the yen and diluting earnings from Japanese reits and trusts. Claims that more retirees and working women playing golf are not backed by data.

Is there some mid term catalyst that you see in Accordia Golf Trust?

Leonard

AK71 said...

Hi Leonard,

Golf as a sport has been declining in popularity not only in Japan but in the USA too. However, it is still a lifestyle for many people and lifestyle cannot be changed abruptly. Although in decline, it is still a very big industry.

So, when investing in something like this, it is important to do so with a margin of safety. At the IPO price of 97c a unit, there was no margin of safety. It was a good deal for the issuer, for sure.

It is also important to invest only in the market leaders because they will be more resilient and Accordia is the market leader in Japan. Their golf courses are also mostly well located and better utilised compared to courses elsewhere in the country.

I don't know if more retirees or ladies will play golf in future. They say, I listen. I will count the chicks when they hatch.

I invest in Accordia Golf Trust at prices which I think give me a relatively good return which is sustainable probably in at least the next 10 years. Beyond that, it is harder to see clearly as the indemnity provided by the sponsor would have expired by then.

As for the Japanese Yen weakening, I believe it cannot go much lower versus the Singapore Dollar. The Singapore Dollar has weakened somewhat too and with inflation more benign now in Singapore, coupled with lackluster economic growth, I believe the MAS will probably let the S$ weaken more. ;)

All else remaining equal, the lower the unit price, the better a deal Accordia Golf Trust is for me. ;)

jovan said...

Hi Ak,

Thank you for writing and posting it online. You are indeed an inspiration to many like myself. Slowly but surely trying to achieve what you have *fingers crossed. :)

AK71 said...

Hi Jovan,

There are many ways to achieve financial freedom and my way is only one of them. It is not the only way. If my sharing has managed to inspire many more on their own journeys, I am happy. :)

iwimsasl said...

AK,

I also hold 5 of the 15 counters you listed here, can share your average price for each so as to further benefit your blog's supporters/readers. Perhaps a price range?

AK71 said...

Hi iwimsasl,

I don't think it is useful for readers to know my entry prices although I blog about them sometimes. If readers are interested, they could search my blog but they are just prices. I wouldn't bother. ;)

qook said...

Hi AK, do you know what is driving Accordia's stock price down? I am vested too and have been accumulating on weakness, but was just curious on why the market thinks so badly of this stock.

AK71 said...

Hi qook,

I don't know for sure although I could make a few guesses. I wouldn't bother sharing them with anyone. ;p

Based on what I do know, I believe that Accordia Golf Trust is becoming more attractive as an investment for income as its unit price declines.

If my estimate of a full year 5.9c DPU for the Trust is to be believed, then, at 59c a unit, we would be looking at a 10% distribution yield. I am waiting. ;p

qook said...

Nice. I will probably be itchy finger and accumulate along the way down. If it really hits 59c, all the better for us income investors to buy more. Gambatte!

Have gotten a lot more serious about saving and investing in recent months while following your blog and really putting in more effort. Striving towards my goal of increasing my current passive income (learnt from you to have personalized goals in baby steps) :)

AK71 said...

Hi qook,

Alamak. My blog has nothing to do with your baby steps. You made the decisions. -.-"

Although AGT might look like a more attractive investment for income as its unit price declines, we want to make sure to size our positions in a way that will not cause us to lose sleep at night. Each person's ability to deal with risk and volatility is different. ;)

Chula Sulagaesuan said...

Hi AK

I notice you have invested in APTT as well. May I know what is your view on it? Since the price has come down recently. At the same time their numbers seem doing ok imo. Which makes it more attractive to invest. I'm thinking of accumulating more :)

AK71 said...

Hi Chula,

My investment in APTT is a legacy position from my investment in MIIF which I was an investor for donkey years.

I am not sure that APTT's income distribution is sustainable but I am comfortable enough to hold on to my existing investment since it is virtually free by now.

You might be interested in reading this article:
http://www.nextinsight.net/index.php/story-archive-mainmenu-60/927-2015/9784-asian-pay-television-trust-kgi-initiates-coverage-with-sell

"While APTT promises to reward shareholders with at least 8.25c dividend again in 2015, the underlying free cash flow does not support such a payout.

"Dividends funded partially by borrowings. We calculate the entire free cash flow of APTT in 2014 could only support a 5.9% dividend yield (5.5c / share). The difference from the 8.25c dividend payout is made up mainly through an increase in borrowings. While new capex to expand in Greater Taichung was one reason that weighed on free cash flow, APTT’s overall performance has been lackluster when benchmarked against its forecasts during IPO. "

AK71 said...

Morning BUY order for Wilmar International at $3.09 filled.

AK71 said...

Morning BUY order for Wilmar International at $2.97 filled.

AK71 said...

Morning BUY order for ST Engineering at $3.02 filled.

AK71 said...

Overnight BUY order for ST Engineering at $2.82 filled.

AK71 said...

Religare Institutional Research said on Thursday that Singapore-headquartered agribusiness group Wilmar International is skating on thin ice, and initiated coverage on it with a "sell" call and a target price of S$2.27.

Wilmar's intense capital expenditure programme (US$6.5 billion over last five years) has delivered poor returns, Religare says.

"Its core refining business is threatened by severe overcapacity and driven by volatile trading gains. At 14x enterprise value/earnings before interest, tax, depreciation & amortisation FY2015 forecast, Wilmar is overvalued for its risks."


The Business Times, 27 Aug 15.

AK71 said...

STE will benefit from Ministry of Defence’s (Mindef) higher defence budget. Defence related work accounts for 33% of STE’s revenue, with the Singapore government accounting for the bulk. FY15’s defence budget has been projected to rise 4.4%yoy which in turn should lead to incremental revenue for STE.

We believe the decline in stock price does not reflect concern over the company’s earnings but is merely linked to index selling. Notably, the yield on STE’s bonds has not risen, and its spread over the dividend yield has risen to record levels. We believe this is not justified given STE’s record orderbook and guidance for a stronger 2H15.

Source:
UOB Kay Hian, 26 August 15.

AK71 said...

Overnight BUY order for Wilmar at $2.53 filled.

Casey said...

Hi Ak,

Accumulated more at 2.53 too. Why is the price collapsing? Thought CHY still stronger than SGD, which Wilmar price is quoted, against USD, thought raw material soy bean and oil seed dropped by 18% from July, and CHY only depreciated at 3% against USD.

Any other stock in your radar?

Cheers.

Casey

AK71 said...

Hi Casey,

I have no idea why the stock price went as low as it did but I am accumulating at lower prices. Pacing myself. ;)

The only stocks I am looking to add are the ones which are in my portfolio. Nothing new. My plate is quite full by now. If prices were to decline further, some stocks would become very undervalued.

AK71 said...

Overnight BUY order for ST Engineering at $2.82 filled.
This translates to a PE ratio of about 17x.

AK71 said...

Sembcorp Industries on Monday (Sep 28) said it will make its foray into Bangladesh by building a 426-megawatt power plant with a total project cost of US$390 million (S$557 million).

The build-own-operate project in the Sirajganj district of Bangladesh was awarded to Sembcorp’s wholly-owned subsidiary, Sembcorp Utilities, by the government of Bangladesh.

The power plant will be fuelled primarily by natural gas with high speed diesel as backup fuel. It will supply power to the grid under a 22.5-year power purchase agreement with the Bangladesh Power Development Board, when completed in 2018.

Sembcorp will own a 71 per cent stake in the project while North-West Power Generation Company, a subsidiary of the Bangladesh Power Development Board, will hold the remaining 29 per cent.

Source:
http://www.channelnewsasia.com/news/business/singapore/sembcorp-to-build-s-557m/2156304.html

E Kk said...

hi AK

With the latest events surrounding Saizen, First and LMRT -- i am scratching my head as to how best to deploy the funds.

I didn't pick up much bargains in the last GSS, hoping that I will get a chance again!

I am waiting patiently for :
ST Engineering to be under $3
Sembcorp Ind to be under $3.30
IREIT to be under $0.65
Neratel to be under $0.63

Think I'll get to shop soon??

May I know if you have been speaking to yourself on Neratel?
The yield seems attractive!
At a very prudent DPU of 3 cents ----- yield is 4.7% at $0.635
At a prudent DPU of 3.5 cents ----- yield is 5.5% at $0.635

AK71 said...

Hi E Kk,

We will have to wait for more details regarding First REIT and LMRT. The last I heard, even the managers don't know what is going on. The sponsor has not been very forthcoming with details.

As for Saizen REIT, the deal isn't done until it is done. There are still a few months into the process.

However, I know what you mean.

Personally, I don't have a problem with holding on to cash while waiting for the next time Mr. Market goes into a depression like he did in late August and early September earlier this year.

When is Mr. Market going into another depression? Your guess is as good as mine. :)

NeraTel? I think a DPS of 3c is sustainable and prudent. I would definitely like to get more on the cheap. ;)

E Kk said...

hi AK

Sembcorp is close to $3 now! A far cry from the $5 not too long ago.

A while ago, i was waiting for it to fall below $3.30 ... now i'm wondering if its a real bargain or a trap!

Have you been talking to yourself about Sembcorp??

AK71 said...

Hi E,

We must not underestimate Mr. Market's pessimism but with consensus that low crude oil prices could drag on for the entire 2016 with recovery only in early 2017, we could see SCI's share price bottoming sometime next year. So, I will be looking to possibly buying more then. I am in no hurry to add. :)

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