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I was already invested in DBS and OCBC before the last bear market triggered by the COVID-19 pandemic and fully expected them to be important income generators in my portfolio.
Although the local banks are well capitalized and have the ability to maintain their dividends, the Monetary Authority of Singapore (MAS) told them to cap dividends last year at 60% of what they were before.
See:
As the dust started to settle in the last bear market, I added UOB to my investment portfolio, gradually increasing my investments in all three banks.
The buying went on for a few months, started in April and went on till October last year.
I was prepared for a year or two of lower dividends from the local banks and, in fact, in my last two passive income updates, I said that my larger investments in the local banks should deliver decent dividends this year but nothing spectacular.
I had very modest expectations.
Well, good news as this is going to change in the future because the MAS has lifted dividend restrictions.
This will have a big impact on my passive income going forward as going back to 100% of what they paid out in the past means a 66% increase in dividends from the local banks.
Since I increased my exposure to the local banks rather substantially in 2020, there should be an even bigger jump in their contribution to my passive income compared to 2019.
Things are looking up.
Hopefully, this is also a sign that the worst is behind us and that the broader economy will do better in the future.
Congratulations to fellow shareholders and good luck to all of us.
Related posts:
1. Buying DBS, OCBC and UOB.
1. Buying DBS, OCBC and UOB.
Bloggy Award
34 comments:
Hi ASSI, based on your 2Q21 bank dividends that you had disclosed, may I ask whether your current overall investment value in the 3 local banks amounted to around $920K-$950K or have I grossly under-estimated? Thanks!
Wow, a Fantastic Four blogs by AK this month!!!!! ;)
Ooooops, just realised that it's actually Fabulous Five blogs in July !!!!!
Look's like there's no stopping AK's fantastic run !!!!!! ;)
Hi Kent,
Since I have never shared the finer details of my investment portfolio, I won't be giving the answer you desire. ;)
Anyway, it really shouldn't matter as it would serve no useful purpose.
Having said this, interested readers who have been tracking my blogs and what I have revealed over the years, they would be able to make some rough estimates. :)
Hi Laurence,
You sound happy but it might be better to think of this as an anomaly. ;p
AK, I an holding DBS and UOB shares. The DBS reaches a record high and never cross this in the past . Thinking of cashing out 1/2 to lock in the gain now. It is farily valued in my opinion but no longer undervalued.
Hi John,
It is definitely hard to say that DBS is undervalued now.
However, to parrot Warren Buffett, paying a fair price for a good business is probably not a bad deal. ;)
Anyway, I agree that taking some profit off the table is never wrong. :)
My father taught me before he passed on in 2014, during a crisis buy bank stocks. I waited for 6 years to grow my war chest. Last year Apr-Jun I bought only Singapore bank stocks. Now they become my core holdings. Bank stocks are the new bonds. As bond yields are low
I did the same as you but on a smaller scale last year and doubled my exposure to banks- both SG as well as globally
The real returns will come when the NIM start to go up when the interest rates go up. This will take long unless inflation kicks in forcing the fed to act
Let us see!
Hi Siew Mun,
It is definitely better to be invested in our local banks than to deposit money in our local banks if we are looking for passive income. ;)
Hi garudadri,
The banking business is cyclical and after a recession, cyclicals will recover. :)
Hi AK,
Love your blog and insights.
What is your take on Wilmar's current share price and its continual downtrend?
Hi Unknown,
Wilmar is undervalued and as its share price declines, it gets more undervalued. ;)
Reference:
Wilmar was $7.11 a share...
Hi AK,
At times, I’m really relieved when I see similar perception and conviction towards most of our holdings.. Lol
Congratulations!
Hi sleepydevil,
Well, you know what they say.
"Great minds think alike and fools seldom differ."
I hope we are not the latter. ;p
Gong xi gong xi! :D
Wow, good! I managed to makan some OCBC last year when the price was down. :)
Hi TDT,
Huat ah! Gong xi gong xi! :D
"OCBC declared an interim dividend of 25 cents per share for the first half of the year, up from 15.9 cents a year ago, representing a payout ratio of 42 per cent against the group's first-half net profit.
"UOB's interim dividend was 60 cents per ordinary share, compared with 39 cents a year ago, translating to a dividend payout ratio of 50 per cent."
Source:
The Straits Times.
"DBS has declared a dividend of 33 cents per share for the second quarter, compared with 18 cents a year ago, bringing the first-half dividend to 51 cents per share. This follows the Monetary Authority of Singapore’s lifting of restrictions that capped dividend payouts from local banks and finance companies at 60 per cent of the previous year’s dividend amid the pandemic."
Source:
The Straits Times.
Huat ah! On rainy days where dividends are lesser, we have CPF to tahan. On sunny days we make hay! 😝
Hi Siew Mun,
Huat ah! I think I shall buy a huat kueh tomorrow.
I don't mind crusty bread but some huat kueh from time to time is good. LOL.
Reference:
Investors eat crusty bread with ink slowly for peace of mind.
Hi Siew Mun , AK
Wilmar big huat too. Good to hear from both
Hi SgFire,
I am holding on to my investment in Wilmar as I feel Mr. Market is undervaluing the business. :)
Hi AK
this is good news, i thought of adding more wilmar. Lets see.
what do u think of IReit latest result ?
Hi SgFire,
IREIT Global is bringing home the bacon, as expected. :)
See:
IREIT Global H1 DPU rises 14.4%...
https://www.theedgesingapore.com/capital/right-timing/dbs-undervalued-and-has-city-developments-bottomed-out
Good morning AK,
Reference to this article… going forward if DBS market cap is to be valued at S$100 b, and with current share outstanding at 2.57b, does it mean that DBS is going to be worth S$38.90 per share! Your thoughts please… thanks 🙏 😊
Hi Eddy,
I did a bit of crystal ball gazing and there is a possibility that we could see DBS go as high as $40.00 a share but if it should happen, it would take quite some time.
If it does not happen, it is not a big deal since I like being paid while I wait.
Oh, please remember that the "crystal ball" is actually my dusty bowling ball in disguise. ;p
Wow, thanks to ur crystal-bowling ball, AK! 🔮 🙏
Guess I’ll have to invest more when there’s any dip in share prices opportunity. 👍🏼
Hi Eddy,
Bowling ball asks why no skills future credit to help pay for its retraining?
I also don't know to believe or not since it is not a certified crystal ball. ;p
Hi Siew Mun,
I would advise you to be a bit careful, cause not all banks are made equal.
The said advice may apply for Singaporean or Canadian banks because they are in an oligopoly, and hence they will bounce back.
If you are buying for the yield, you can borrow a page from the investors in HSBC, Standard Chartered etc. I dun think investors will be happy with their dividend payout.
Hello AK
Ireit: it was reported that the manager will be implementing the dual currency trading in euros and Singapore dollars for IReit with effect from Aug 17, what is the impact on unitholders?
Thank u.
Hi OK,
It means that trading of IREIT Global's units can be carried out in both Euro and S$.
Shouldn't matter to us if we are just buying or selling in S$.
More interesting is the statement that future income distributions will be made in Euros which means that how much income distribution we receive from IREIT in future in S$ terms would depend on the prevailing Euro to S$ exchange rate.
Hi AK,
Like to ask your view on Chinese big four banks listed on HKSX - ICBC, CCB, ABC & BOC
They are the world largest banks by assets under management. Since March this year, their share prices has dropped by between 15% to 20%, possibly due to the effect of crackdown by their authority.
Currently all their PEs are below 10X multiples, pretty low as compared to S’pore banks and their dividend yield range between 6.5% to 8.5% which is very attractive in my view.
If u have a choice, which one will u choose to invest in?
Thanks
Hi Eddy,
I really don't know anything about these banks.
I am a frog in a small well. ;p
When I did venture out of my well donkey years ago, I was clobbered by CLOB. O_o
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