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3Q 2022 passive income: Stunned like vegetable!

Sunday, September 25, 2022

In my last quarterly passive income update, I said that I was too active as an investor for income in 2Q 2022 and that I was looking forward to being lazy again.

Did I get to be lazy in 3Q 2022?

Well, I almost did nothing until I added to my investments in IREIT Global and a Chinese tech ETF in September as their prices declined pretty dramatically.

Although Europe's economy is likely to go into a recession, IREIT Global's numbers are strong and unless we expect their tenants to default en masse, it is hard to justify such a dramatic decline in unit price.

Doing a bit of investigation told us that a substantial shareholder, AT Group, was probably responsible for bulk of the selling and Mr. Market simply could not absorb so much in such a short time.

I see a weaker Euro, higher interest rates and a longer time to backfill vacated premises as reasons for some weakness but not a 20% decline in unit price.

Mr. Market oversold.

So, I had to buy more at 50c a unit.

It was a good bargain, in my opinion.

Any price under 50c a unit would be a steal, all else being equal.

I would most likely be buying more then.




As for Lion-OCBC Hang Seng Tech ETF, regular readers would probably remember that I said it was an experiment for me. 

I am an ignoramus when it comes to tech stuff.

My position in the ETF is still less than 1% of my portfolio's market value although I bought more recently.

The position might grow a bit especially if the unit price declines to test the low of 15 March but  it is unlikely to grow much bigger.

One reason why it is likely to stay relatively small is because the ETF does not pay a dividend and I have to trade to make some money from it.

Sounds like work, doesn't it?

Too much work for me.

Yes, AK is lazy.

OK, maybe, AK being lazy is the main reason why the position is staying small.

Alamak, ownself poke ownself.




Anyway, in my 2Q 2022 passive income report, I also said that I expected my passive income in 3Q 2022 to come in weaker year on year.

The reason is simple.

In 3Q 2021, there was a pretty significant one time final distribution from Accordia Golf Trust which, of course, is no more.

That final distribution represented a big chunk of  my passive income received in 3Q 2021.

So, missing that, there was a big hole that must be filled in 3Q 2022.

Although I expected that changes I made in recent months would pick up some of the slack, I was not sure that the hole could be completely filled.

It was a case of hope for the best but prepare for the worst.

I wasn't expecting a tragic outcome but I wasn't expecting something to celebrate either.

I was crossing fingers and toes.




Then, with the weakening Euro, it became quite clear that IREIT Global's distribution would come in lower compared to 1Q 2022 and it did by about 10%.

Yikes!

Double whammy!

As if things were not looking gloomy enough already, Mr. Market poked me in the ribs.

What to do?

I was basically digging in for a weaker 3Q 2022.

So as not to set myself up for disappointment, it was the sensible thing to do.

Then, the moment of truth.

The once per quarter login to my bank account to check on the dividends received.

My jaw dropped.

OMG!



I must have done something right because 3Q 2022 passive income came in higher than in 3Q 2021!

3Q 2021 passive income:

$69,145.13

3Q 2022 passive income:

$75,989.50




I would have been quite amazed even if there had been no decline in 3Q 2022 passive income year on year. 

However, 3Q 2022 passive income increased by almost 10% year on year instead!

OMG!

Mind boggling!

I so stunned like vegetable!



When I blogged about my 2Q 2022 passive income, I titled the blog "Stronger with changes."

It seems that the changes I made have strengthened my passive income in 3Q 2022 as well.

Forget spinach, I feel like eating some broccoli now!

Eat broccoli!

Makes passive income strong!




OK, be serious, AK.

If you are new to my blog or cannot remember the changes I made to my investment portfolio, you might be interested in reading these blogs:

1. Reallocate as interest rate rises.

2. 2Q 2022 passive income: Stronger with changes.

Having read those blogs again myself, I am really glad I wasn't too lazy to do what I did. 

My full year passive income in 2021 was:

$171,854.30

I titled that blog "Don't lose hope."

See:

4Q 2021 passive income: Don't lose hope.

Passive income in the first 9 months of 2022: 

$ 180,667.92




Already 5% higher than passive income for the whole of 2021, with 3 more months to go, 2022 will probably be ending on a high note, barring unforeseen negative events.

Investing for income allows me to be lazy most of the time.

Once in a while, I have to take time off from my life in virtual worlds to work on my investment portfolio in real life.

The world is in a mess now but I am staying invested for income.




Stay on the path to financial freedom.

Mostly investing in bona fide income generating assets can only help.

Don't stray especially when things look bleak.

It is when things look bleak that people give in to despair.

Don't give up.

Never give up.

Soldier on and we will be rewarded in good time.

Of course, it is never my way or the high way.

If you like my way, then, remember, if AK can do it, so can you!

Believe it!

Gambatte!




Recently published:
1. IREIT Global: Short term pain.
2. Chinese tech, IREIT, CPF etc.




36 comments:

sid said...

Wonderful, AK!
Really impressive.

AK71 said...

Hi sid,

Thank you for cheering me on. :D

No said...

Hi AK,

Have been following your blog. May I ask which trading broker are you using to “minimise” your trading fees? As we know the fees can be quite a sum with the kind of volume you are trading. Thanks!

AK71 said...

Hi No,

I am mostly investing for income.

So, I hardly trade and I have been using the same brokers for more than 20 years.

Too lazy to look for the cheapest broker available. ;p

Clue:
Impressive passive income but you lying?

Rellangis said...

Hi AK,

Do you have any idea why iReit pays its dividend via PayNow and not reflect as Ireit Div like any other stocks? Is it always like that?

AK71 said...

Hi Rellangis,

It became like this only recently as the REIT no longer does currency hedging.

So, what we get is actually payment in Euro but converted into S$ at the prevailing rate.

It is a transfer from their bank account to ours, if I understand it correctly.

1 said...

Given the recent crash and more to come in the coming months, i bet the drop in ur portfolio value exceeds the dividends received so far.
Ya i know i know
If we are investing for income, price drop means more discount for good companies paying sustainable dividends.
But there is also this psychological aspect of managing one's portfolio. Its easy to buy a good company when the market is green and hard to buy when the market is bottoming.when is the top?? I dont know... When is the bottom?? I oso dont know... Cham liao like this

AK71 said...

Hi 1,

If we look at the recent crash, then, the only position in my portfolio which has experienced a big paper loss this year is IREIT Global.

Other positions are holding up quite well.

Investments in DBS, OCBC and UOB are, in fact, still doing very well.

Having said this, psychologically, investors for income should be wired differently from people who are trading for income.

We can never know when is the market top or the bottom until after the fact.

As investors for income, that is not our concern, anyway.

I just have an idea of what value I am getting for my money whenever Mr. Market makes an offer and if I think it is value for money, I buy some.

So, you are right that I am waiting to buy more at lower prices because if prices stayed high, I would have nothing worth buying.

It is easier to buy when prices are bottoming because we get better value for money just like I did the banks in the pandemic induced bear market.

Some things we can control and some things we cannot control.

Don't let Mr. Market or anyone else mess with our mental health.

Peace of mind is priceless. :)

References:
1. Investing for income and stock prices.
2. Investors eat crusty bread with ink slowly for peace of mind.

EX said...

Hi AK, totally agree but I don't think we are ever going to see the bottom like what happened when pandemic started 2 years ago so I am just trying to buy in bits whenever the bank prices drop. :)

AK71 said...

Hi EX,

Sounds like you have a plan and I like it.

The local banking sector has a very strong tailwind in rising interest rates and as long as we do not see a deep and protracted recession, all the banks should do relatively well.

Having this view is also one reason why I increased exposure to OCBC in May and June this year, making OCBC my largest investment in the local banking sector.

I am now eyeing UOB which I only started investing in during the pandemic induced bear market so that I am invested in all three local lenders.

Already a substantial investment but smaller than my investment in OCBC, I think it is sensible to increase exposure to UOB next and not be overly exposed to OCBC although OCBC feels like a better value proposition.

Also, I think UOB is likely to see benefits from its purchase of Citibank's Southeast Asian retail network crystalizing in the not too distant future which should result in stronger earnings and hopefully higher dividends.

Good luck to both of us. :)

EX said...

Yes plus many people are queuing up to put $$ into UOB FD at 2.6%. There's always a long queue at the branch near my place. :)

AK71 said...

Hi EX,

As a UOB shareholder, I am so grateful to these people.

Kamsiah plenty plenty. :D

SN said...

Hi AK,

With rising interest rates, do you think AA reit's closing price today of $1.25 is undervalued and a good buy for dividends? (current yield is at 7.76% based on last year's dividend payout)

Do you plan to raise your position with the recent decline?

Thanks.

AK71 said...

Hi SN,

If we think undervalued, AA REIT isn't as undervalued as IREIT Global at this point in time.

This was why I increased my investment in IREIT Global instead of AA REIT recently.

Having said this, I like both REITs and if I have the resources, I would buy both.

Unfortunately, I don't as I am putting aside money to top up my CPF account in the new year.

Having said this, if AA REIT should decline as much as IREIT Global in percentage terms, I would be sorely tempted.

Reference:
Chinese tech, IREIT Global and CPF.

Rookie said...

Hi AK,
In that case, CLCT is more undervalued compared to IREIT.
Everything looks attractive now. :)

AK71 said...

Hi Rookie,

Apart from the decline in unit price and discount to NAV, there are other considerations.

IREIT Global's gearing level is much lower and its balance sheet is also much stronger.

Of course, this is not saying that CLCT isn't attractive but IREIT Global just looks more attractive.

Capricon said...

Hi AK
When you says IREIT has stronger balance sheet, what are the things you are comparing?
Sorry for being a noob in financial statements.

AK71 said...

Hi Capricon,

A reader asked me why I invested in IREIT Global and not Cromwell European REIT back in June?

It is a question I got asked many times over the years and I asked him to compare the REITs' latest financial ratios.

I shared the links below and you can take a look. ;)

http://ireitglobal.listedcompany.com/financial_ratios.html

https://investor.cromwelleuropeanreit.com.sg/financial_ratios.html

IREIT Global is probably one of the strongest REITs around when it comes to numbers, just not its unit price. ;p

The question was asked in my blog sharing my largest investments in 2Q 2022.

You might want to go through the comments section of that blog because there are more than 50 comments and some very good ones from readers.

See:
Largest investments 2Q 2022.

keng said...

That was me :P and wow so many comments after that!

With limited cash, I have not invested in IREIT yet. I did add a little FCT to my kid's portfolio, hope it turns out well.
FLT is also coming down.

So many quality REITs, not enough cash :(

Hope Mr Market can wait a little longer for me to cash up!

AK71 said...

Hi keng,

You have good memory! :D

Well, it is a blessing that you did not invest in IREIT Global back then because of limited cash as you can get some on the cheap now. ;)

I have a feeling that Mr. Market's current depression will last quite a bit longer, if I were to hazard a guess, until sometime next year.

So, plenty of time.

It is not just the REITs which are getting hammered as I see stock prices of the banks declining too.

Well, Mr. Market can stay irrational longer than we can stay solvent, as the saying goes. ;p

Elaine said...

Hi AK

Thank you for always sharing wisdom with loads of humour!

With the Euros and Pounds weakening, do you foresee the income of Ireit being affected in major fashion?

garudadri said...

Dear AK
Once again an inspirational post and kudos on touching the 20K PER MONTH equivalent in these 9 months of CY 22
You might remember that I predicted you would touch this when I posted last year the same- with banks restoring full dividends plus REITS increasing payouts
I am apprehensive that the interest rate hikes might erode the REITS more and perhaps another 10% or so drop is expected
The banks offer good value again even at these prices and I will add them on downdays
A barbell approach to add REITS will be in place with the banks to REITS at a roughly 2:1 ratio fund allocation
However, the third quarter US earning season might tilt the balance either way and if the earnings disappoint , more prolonged downside will be the reality- frustrating but good opportunity to build a resilient portfolio
I am disinclined to give up on the US market and I actively invest there as I will take in the risk, the growth potential for the US blue chips can be utilized to increase the capital and then boom profits to revert funds to SG dividend stocks
This will be my plan but fingers crossed
Best wishes
Garudadri

Betta man said...

Hi AK,

What do you think of SATS acquiring WFS ? SATS share price got hammered badly.

AK71 said...

Hi Elaine,

The weak Sterling Pound would affect Elite Commercial REIT but not IREIT Global.

As for the weak Euro, it has already affected my income from IREIT Global which declined by 10% in 3Q 2022 compared to 1Q 2022.

I doubt that the Euro will weaken dramatically from here since the ECB has started to hike interest rate.

Countries which hike their interest rates in tandem with the US Fed are less likely to see a dramatic weakening of their currencies.

The ECB was lagging the US Fed and now must catch up. ;p

Reference:
Inflation in Europe, weakening Euro and IREIT Global.

AK71 said...

Hi Garudadri,

Thank you for the encouraging words.

$20K passive income per month for the full year would be very nice but 4Q 2022 is likely to be a weak quarter and I don't see it delivering $60K in passive income.

Rising interest rates will definitely impact borrowers negatively but if the borrowings are used to invest in good income producing assets with the ability to increase earnings in an inflationary environment, then, it is less of a concern.

If the borrowings are used to fund cash burning activities with only vague promises that they will do better, then, I would avoid at all cost. GRAB anyone? Bad AK! Bad AK!

I agree that the local banks offer good value as investments for income even now and I increased exposure to UOB as its share price declined closer to $26 a share recently.

As a retiree, however, it is much harder for me to accumulate cash as I lack an earned income and consume most of my passive income.

So, I will have to buy in slowly. UOB at $25 a share, maybe?

Good luck to both of us.

AK71 said...

Hi Betta man,

I would prefer SATS to be more conservative but it is what it is.

Crossing fingers that the management can pull it off.

My exposure to SATS is rather small as I used some of my SRS money to invest in it years ago.

Will have to wait and see.

Reference:
How AK uses his SRS money and why?

Unknown said...

Hi AK, Thanks for sharing so generously.

Wow you consumed most of your passive income! Your passive income is more than most ppl salary!

BTW, any thoughts on Kep Pacific Oak ? Does it look attractive to you at current price?

AK71 said...

Hi Unknown,

Yeah, I used to be able to invest all of my passive income when I had an earned income.

Not the case anymore as a retiree.

However, it is probably a mistake to say I consume most of my passive income since a percentage of that "consumption" is the max VC to my CPF account which really is savings and not consumption.

In case you did not see the update:
Inflation, passive income and updating my budget.

As for Kep Pacific Oak, it is the same as the other REITs which hold 100% US assets.

I am not comfortable with how they avoid paying withholding tax.

So, when in doubt, I stay out.

I would rather stick with stuff I am more familiar with.

Wei said...

Thanks AK for being a steady rock during this period!

I dare say playing games actually make you a better investor as you shut out more noise which may cause one to make irrational decisions, instead only focus on the important things!

-Wei

AK71 said...

Hi Wei,

I am not sure if I am a steady rock but I like the idea of being a rock. :D

Spending most of my time gaming definitely leaves me with less time to look at stocks.

Like you said, it could be a blessing in disguise.

Having said this, my way works for me as I am focused on generating passive income.

Many stocks which are good in generating passive income for us are pretty boring.

People who are looking to get rich quick would probably not be interested.

So, better investor?

Some might disagree but I don't care. ;p

Gambatte! :D

The Dreamzola Traveller said...

Mu hahahahaa, you better don get too lazy on keeping up consistent exercise. Health is precious!



AK71 said...

Hi TDT,

Thank you for the reminder. :D

Yes, I have been tempted so often not to go stair climbing or brisk walking in the evenings. ;p

Ryan said...

Hi AK71,

The price of Wilmar and Comfort Delgro has dropped substantially these few weeks. Can I check if you have already or will be buying more of them?

AK71 said...

Hi Ryan,

I am making a $38,000 application for the latest Singapore Savings Bond.

Stocks will have to wait. (TmT)

Having said this, my priority now when it comes to stocks is to accumulate a larger position in UOB.

My resources are pretty limited right now or I will buy a bit of everything I like. :)

References:
1. Singapore Savings Bond?
2. Money in CPF or money in stocks?
3. OCBC is my largest investment in the banking sector.
4. UOB at $25 a share?

SgFire said...

Hi Ak, what would be a good entry for uob for you?

AK71 said...

Hi SgFire,

The lower the better, of course. ;p

On a serious note, the current price is not bad either and I bought some at closer to $26 a share recently.

Price could go lower especially if global recession plays out.

We don't know what we don't know.

Plus the fact that my resources are limited, I will be taking it slow.

Reference:
UOB at $25?


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