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1Q 2021 passive income: Sabana and IREIT to the rescue.

Friday, April 2, 2021

It has been a few weeks since my last blog and I hope everyone is doing well.

I have not done anything to my portfolio in 1Q 2021 apart from adding a bit more to my investment in Sabana REIT in early January.

Of course, from my blog title, you would be able to tell that my decision to significantly increase my investment in Sabana REIT late last year and early this year turned out pretty well.

Total dividends received in 1Q 2021 was some 48% higher compared to 1Q 2020 and my bigger investment in Sabana REIT is one reason for this.




The biggest contributor to the increase in dividends in dollar terms, year on year, is IREIT Global, as I took part in the rights issue and even bought more after the rights issue.

Total passive income from my investments in 1Q 2021:

$36,551.14


This will help to pick up some slack which I am expecting in 2Q 2021.

2Q 2020 saw a strong passive income number of $57,395.95 but that included distributions from two big investments in my portfolio: 

and 





Of course, Accordia Golf Trust is no more while Centurion Corporation has suspended dividends.

Although I have increased my investments in DBS, OCBC and UOB, they are still paying lower dividends for the time being.

Expecting decent enough dividends but nothing very impressive.

ST Engineering, VICOM and Wilmar should help to bring home much of the bacon in 2Q 2021 while ComfortDelgro might take a bit more time to recover.

Time will tell.

I will just wait to see how things turn out and probably share my 2Q 2021 numbers in early July.




At the moment, I am somewhat optimistic that my portfolio should be able to generate at least $120,000 in passive income this year.


I cannot be absolutely sure since the COVID-19 pandemic is still very much alive.

So, although vaccines are available now and a global vaccination drive is underway, we should remain cautious.

Things should get better from here if we are more cautious and we should see some semblance of the old normal returning in another couple of years if nothing goes wrong.




The fear is complacency and, worse, a mutation of the virus which the vaccines are ineffective against.

Having said this, if you can, register for vaccination and get people around you to do the same.

Till the next blog, stay safe and keep all of us safe.






42 comments:

Unknown said...

Hi Ak,

Congratulations on the stellar results despite a very difficult 2020.

Stay safe and wishing you the very best in your investment journey for the rest of 2021.

Sk

KC said...

Dear AK,

Thanks for your sharing, as always.


Are you concerned about Ireit's tenant concentration risk? This is in light of GMG's decision not to renew their lease at Munster South (and instead consolidating at Munster North).

Do you think the risk/reward has been priced in?

Thank you.

KC said...

Hi AK,

Thanks for your sharing.

Are you concerned about Ireit's tenant concentration risk? This is especially in light of GMG's decision not to renew their lease at Munster South (and instead consolidating at Munster North).

Do you think the risk/reward has been priced in?

Cory said...

If the Vaccines is not effective at all on any new variant .... I think this will really shake the market. Time will tell when the Mutant Variant comes!

AK71 said...

Hi Sk,

Thank you for the encouragement and well wishes.

Good luck to all of us. :)

AK71 said...

Hi KC,

Concentration risk can be a double edged sword.

Deutsche Telekom and Europe’s largest pension fund, Deutsche Rentenversicherung (DRV) account for more than half of IREIT Global's income.

They are financially strong and also rather sticky tenants which is a good thing.

The work from home trend is probably not going away in a hurry, however, and many large organizations are still right sizing their office staff.

Your guess is as good as mine how this will impact IREIT Global over time.

If things improve faster from here with winter coming to an end, IREIT Global's current unit price is going to look cheap later down the road.

Reference:
Largest REIT investments updated.

AK71 said...

Hi Cory,

We should not throw caution to the wind and I keep reminding myself of "Disease X" which PM Lee mentioned.

Not putting more money in the stock market at this point and just slowly rebuilding my war chest.

TCC said...

Dear AK:

Please stay safe and have yourself vaccinated too.

teoyh said...

Hi AK,

Can you comment on this shipping trust - FSLT (First Ship lease Trust). It is currently trading at 8.5 cents, at 10.7% dividend forward yield, potential 3.8 cents cash distribution next quarter, and debt free. In the past one year, it has given out dividend of US1.5 cents three times.

AK71 said...

Hi TCC,

I have already registered with MOH.

They will contact me when they have a time and date for me.

Hope I don't have to wait too long. :)

AK71 said...

Hi teoyh,

The last time I blogged about FSL Trust was 7 years ago.

At the time, I observed that:

"They took on more impairment to more accurately reflect the values of the assets held by FSL Trust and they also bought units in the open market as the price plunged, believing that the future of the Trust is now brighter."

I have not looked at and definitely have not touched FSL Trust since.

It was a pretty long blog and if you are interested in a backgrounder, here is the link:
FSL Trust: Asset play with 80% discount to NAV?

Unknown said...

Hi Ak,

May I hear your thoughts about inflation and how would u position your portfolio? With the 1.9t stimulus from US, I am sure this will spill over to Asia with better growth prospects and thereby lifting prices and the nagging issue of inflation in time to come.

Thank you.

Sk

AK71 said...

Hi Sk,

Well, if we believe that inflation is coming, then, we should be investing in real estate.

After the Global Financial Crisis (GFC), we saw real estate prices rising due to the massive Quantitative Easing (QE) measures and history might repeat itself.

Of course, we should be selective in what kind of real estate we invest in while bearing in mind not to pay a big premium to valuation.

You might be interested in a recent reply to another reader's comment on my perspective on real estate: HERE.

Investing in undervalued and well run REITs which generate decent income is one way to hedge ourselves against inflation.

You might be interested in this blog on why REITs are different from bonds:
Dumping all my investments in REITs.

Dom said...

As usual, thank you for sharing

AK71 said...

Hi Dom,

Just the usual talking to myself, of course. ;)

Krishna said...

Hi AK,

Thanks for your sharing.
Can you please advise your investment thesis on Sabana reit.

Thanks

Krish

Investminds said...

Hi Ak, solid 1Q 21 dividends. Thanks for sharing. Stay safe and stay healthy.

AK71 said...

Hi Krishna,

I talked to myself on increasing the size of my investment in Sabana REIT in an earlier blog and you will find it here:
4Q 2020 passive income.

If you are interested in a bit of history, there is also this blog from 2017:
History with Sabana REIT and current thoughts.

AK71 said...

Hi Investminds,

Thank you for the encouragement.

Hope all of us stay safe and healthy. :)

Krishna said...

Thanks AK...appreciate your help..stay safe...take care

AK71 said...

Hi Krishna,

Just talking to myself as usual. ;)

Take care and stay safe too. :)

Unknown said...

Hi AK, can you talk to yourself regarding VICOM at the current share price after splitting?

Unknown said...

Hi AK, can you talk to yourself regarding VICOM at the current share price after splitting?

AK71 said...

Hi Unknown,

Well, if we work backwards by multiplying the price 4x, VICOM is trading at almost $9 per share. That looks pretty rich to me. I am just holding on to what I have and not adding.

For an idea on how I did valuation for VICOM, you might want to read this blog:
VICOM: Initiated long position at $5.71.

A said...

Hi, AK
I'm new to investing, with 3k what stocks would you recommend worth investing? I see you did some banks investment would it ideal to start from there?

AK71 said...

Hi A,

Welcome to my blog. :)

Although I might blog about some stocks from time to time, I don't usually tell people what stocks to buy or sell.

I am more interested in sharing my methods and philosophy.

Think of AK as being more inspirational than anything else. ;)

You might want to read these blogs to get some ideas:
1. Investors eat crusty bread with ink slowly.
2. My investment portfolio or my investment philosophy.
3. Holistic approach to a secure financial future.

Gambatte! :D

john said...

IREIT made a retail property acqusition and requires right issues again !!!!

Eddy said...

https://www.theedgesingapore.com/news/reits/ireit-global-ventures-france-purchase-27-properties-decathlon-eur111-mil

Hi AK, would you like hear your take on IREIT latest acquisition. Especially on its dpu yield accretion of only 1%, but its leverage % will go up by 1.2% and its NAV Will dropped by -6.2% (from 0.47 down to 0.44 per unit/share). Thank you.

AK71 said...

Hi John and Eddy,

IREIT Global's relatively high distribution yield makes it harder for them to make yield accretive purchases.

This isn't the best deal but it isn't the worst either.

I like that the deal comes with a relatively long lease to a big name.

Stability is a good thing when investing for income. :)

john said...

The long lease is good.

But my concern Decathon is a retails, mainly in sport & lifestyle which business can be deteriorated easily. and the lease can be break at 6 yrs.

and if such property can be easily retenated ,as it is built as a large space for a large retailer.

Eddy said...

“Stability is a good thing when investing for income.”
Very well said, AK. Thanks

Will add more if IREIT’s mgt decides to raise fund thru rights issue. “)

AK71 said...

Hi John,

Of course, there is no certainty unlike a Fixed Deposit in a bank or a Singapore Savings Bond which is why we have to ask if we are compensated sufficiently for the risk we are taking?

This is very subjective but in the current ultra low interest rate environment, I believe it is a decent enough proposition or we can accept much lower returns in other investments with much lower risk.

AK71 said...

Hi Eddy,

A rights issue is almost certainly to happen but it is probably relatively small.

Could be 1 for 5 or maybe 1 for 4.

The REIT could use more debt as it would probably be cheaper to fund the acquisition that way.

We shall see what happens. :)

john said...

Prefer right issue.

always get the excess rights for past IREIT.

AK71 said...

Hi John,

As long as the funds are used to generate more income, I like rights issues more than private placements since I do not ever get invited for the latter. ;p

However, if there is ample debt headroom and if available cheaply, I would prefer the REIT to use debt instead as I get more income without having to do anything. :)

john said...

AK,

Usually, when we apply for right excess, how much will it apply such that we can get the maximum allotment IF based on your past experience.

Based on my own experience, I realise that if we apply twice our entitlement and will get the maximum . Any further applied does not increase the excess right alloted and will tie down the funds for that period involved unnecessarily.

AK71 said...

Hi John,

After taking part in so many rights issues over the years, my conclusion is that it depends on the issuer.

Some issuers favor smaller investors while some favor larger investors and some treat all equally.

Just apply for whatever amount you think you are comfortable with holding.

Applying for more excess rights thinking that you will not get all you applied for can be risky as you could end up with much more than you intended to hold.

This happened to a friend who applied for APTT's excess rights and got everything he applied for which was more than what he really wanted.

AK71 said...

All viruses naturally mutate over time, and Sars-CoV-2 is no exception.

Since the virus was first identified a year ago, thousands of mutations have arisen.

The vast majority of mutations are "passengers" and will have little impact, says Dr Lucy van Dorp, an expert in the evolution of pathogens at University College London.

"They don't change the behaviour of the virus, they are just carried along."

But every once in a while, a virus strikes lucky by mutating in a way that helps it survive and reproduce.


Reference:
Coronavirus variants and mutations.

Rookie said...

Hi AK,
Will you be subscribing to the Preferential offering for IREIT.
Thanks
Nic

Bananamint said...

Hi AK,

Will you be participating in the upcoming rights issue by IREIT? :)

Chandra said...

Hi AK,

Hope you're in good health. Mind sharing some insights on recent iREIT Global right issue. Thank you.

AK71 said...

Hi everybody,

Please see latest blog. :)

IREIT Global: 214 for 1000 rights issue.

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