$50k in annual passive income: Year end status.

The last time I wrote about my attempt to achieve an annual passive income of at least $50k was on 5 Sep when I concluded that "With Saizen REIT's contribution, I would probably exceed the target I have set for myself which is "to create a minimum of $50k in annual passive income from investments in the stock market alone."  I shared this aim here in my blog on 27 Feb 2010, more than half a year ago. Like with everything, however, this needs confirmation. Let us see what happens in December 2010." Read blog post here.

For quite some time now, my focus has been on my top three investments when I talk about building a reliable stream of passive income from the stock market.  They are Saizen REIT, AIMS AMP Capital Industrial REIT and LMIR.

One of my friends told me that this is inaccurate since I do not include dividends received from my other investments in the stock market such as First REIT, Suntec REIT and SPH. I must admit that I have not been fastidious that way. However, my investments in other counters are so dwarfed by my top three investments that, for the sake of simplicity, I have excluded them. Also, funds from the complete divestment of CitySpring Infrastructure Trust and Cambridge Industrial Trust as well as the privatisation of Hyflux Water Trust have largely been redeployed to AIMS AMP Capital Industrial REIT and Saizen REIT.

So, for this blog post, again, I will just focus on my top three investments to see if I have managed to hit the said target. I don't think we need to wait till December to see how things will turn out since both LMIR and AIMS AMP Capital Industrial REIT have declared their final distributions for the year.

Saizen REIT

Saizen REIT's next income distribution is in March 2011. I overlooked the fact that this REIT pays half-yearly. So, without any contribution from Saizen REIT in December, I would probably not be able to hit the $50k target this year.

Also, my estimate of an annualised 1.6c DPU for Saizen REIT was somewhat optimistic earlier in Sep and it was partly premised on the successful re-financing of YK Shintoku. A more realistic annualised DPU is probably about 1.2c if YK Shintoku's loan was refinanced successfully sooner than later. This is after learning at the AGM that continual divestment of properties in YK Shintoku is necessary in order for refinancing to be viewed more favourably by potential lenders. For me, this means a reduction of 25% in estimated passive income from this investment.

Needless to say, such a reduction is not helpful towards achieving the annual passive income target I have set but in absolute dollar terms, I still expect this REIT to contribute a lion's share of my passive income for 2011.

Read my comments here.

AIMS AMP Capital Industrial REIT

This REIT had a successful rights issue recently which made its existing unitholders somewhat richer. I was very pleased with the rights issue and I have not sold any of my rights units exercised at 15.5c as they will enjoy a yield of 13.4% in 2011 when the annualised DPU of 2.08c kicks in. Of course, trading at 22.5c a unit now, I have a handsome 45% capital gain (on paper) for these rights units as well.

However, the last income distribution came in weaker at DPU of 0.3968c. In my blog post of 29 Oct, I said, "This is because of the issue of 513.3 million rights units on 14 October 2010 and 7.2 million units to the Manager on 19 October 2010 for payment of the acquisition fee in relation to the acquisition of 27 Penjuru Lane. Distributable income from 27 Penjuru Lane would be included in the next distribution, not this one, since the acquisition was done in 3Q FY2011 and not in 2Q FY2011."  Read blog post here.

Of course, this does not change the fact that the lower DPU this time round (payable in December) is not going to help me hit my passive income target this year.


LMIR

Although I am still somewhat disappointed with the management, this REIT is a stable passive income generator. Their latest DPU of 1.09c is marginally higher than the previous quarter's 1.04c.  This is largely in line with my expectations, that "I expect the S$ to appreciate more robustly in future and it is unlikely that the DPU would reduce much more.  Conservatively, I estimate the DPU to be 1c per quarter or 4c per year from December 2010." Read blog post here.

Obviously, at a more conservative estimate of 4c DPU per annum, this is 20% lesser than the 5c DPU I was expecting at the start of the year.

So, based purely on these three investments, I have come up short this year with regards to my annual passive income target in the stock market.

Important development:

Recently, I have been buying more units of First REIT with a view that their recently announced acquisitions and rights issue are attractive propositions which would provide a distribution yield of 9% in 2011. Including the rights which I am entitled to and which I fully intend to accept and pay for, First REIT would rival LMIR as my third largest investment in the stock market.

So, from 1 Jan 2011, I will include dividends collected from First REIT in my calculations towards the target of $50k in annual passive income. I will continue to share my results here in my blog. Wish me luck.

Related posts:
$50k in annual passive income.
First REIT: Rights issue.