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Good news from UOB and OCBC!
When DBS declared a special dividend, I wondered if UOB and OCBC would do the same.
Unfortunately, there is no special dividend from UOB and OCBC.
However, they did declare higher final dividends!
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| Source: UOB. |
UOB increased their final dividend by 15c or 25%.
This isn't too shabby since it is very close to a 50% payout ratio.
We can probably expect this to be the norm in future as it isn't a special dividend and, thus, unlikely to be a one off event.
As for OCBC, they hiked their final dividend by 12c!
While it is lower than UOB's 15c hike in absolute terms, it is much higher in percentage terms.
An increase of 12c from 28c to 40c is an almost 43% hike!
I am so stunned like vegetable!
OCBC is not only one of my largest investments.
OCBC is my largest investment in equities.
My investment in OCBC is much larger than my investment in UOB.
So, my passive income in the form of a final dividend from OCBC is going to be very much larger this year compared to last year.
This is especially when I increased the size of my investment in OCBC many times in 2H 2022.
Although my war chest was rather depleted, I was able to do this by reducing my investments in Centurion Corp. and ComfortDelgro which were both underperforming.
In my blog on Wilmar's record dividend, I said I was feeling a little giddy.
I think it just got worse.
Want evidence?
See the new photo of AK below.
Alamak!
I slapped myself hard and reminded myself that the higher dividends from our local lenders will go some way to filling shortfalls from Sabana REIT, CapitaLand China Trust and IREIT Global this year.
Still early days, to avoid possible disappointment, I am keeping expectations low with regards to full year passive income for 2023.
After all, I cannot dictate how much my investments should pay me.
I will continue to exercise prudence when it comes to expenses as, generally, this is something I have considerable control over.
However, to be honest, I am feeling more sanguine about this year's passive income now.
Whether the year would end on a high note for me as an investor for income should become clearer in another 6 months or so from now.
Till then, I just have to be patient and wait.
"Wall Street makes its money on activity. You make your money on inactivity."To fellow UOB and OCBC shareholders, congratulations! Huat ah!
References:
1. Reallocation of resources.
2. DBS, OCBC and UOB.
3. DBS: Special dividend.
4. 4Q 2022 passive income.
5. Largest investments (4Q 2022.)
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16 comments:
Hi AK,
indeed huat ah! But it's interesting to note the share prices of the banks dropped after their announcement
Hi Yv,
This is why I always say that there is no accounting for Mr. Market's mood swings. ;p
As long as we are investing in good income generating assets which pay us reasonably well, we don't have to worry about stock prices fluctuating.
This is the beauty of investing for income. :D
yay! huat to everyone!
there has been talk about the business cycle in banks topping out. I personally think the top is further out than what the market believes currently. I have been considering a strategy of reallocating positions between reits and banks over the business cycle. Can you talk to yourself about it?
Thanks in advance!
Hi zhenling,
Business cycle topping?
Your guess is as good as mine.
Even experts cannot agree on this. ;p
Whatever we think is going to happen doesn't matter to Mr. Market.
Mr. Market will do what he wants to do and I have given up trying, a long time ago, to guess what he is going to do next.
Chances of anyone being right is fifty fifty. ;p
What we can do is to build a relatively resilient investment portfolio that will do well in the longer term no matter where we are in the business cycle.
Having some quality fixed income to reduce the volatility in our investment portfolio is not a bad idea.
Being 100% in equities isn't a good idea if we have a weak heart.
Together with a meaningful exposure to quality fixed income, being invested both in banks and REITs is not a bad idea.
Basically, we want to stay invested in a mix of good income generating assets that will pay us reasonably well, year after year.
I try to keep things simple or my ageing brain will overheat. ;p
I am happy too when I saw ocbc increase their dividends.. I believe all financial institutions are doing well this year, as I see Hong Leong finance increasing their dividends by 60% too!!! (But that's after a rather huge drop during covid)... Still feeling great collecting dividends!!
Hi Newbie investor,
Thanks for reminding me.
I do have a tiny investment in Hong Leong Finance too.
Yes, dividends got cut and suspended during the pandemic.
Scary times.
This is why it is important to have an emergency fund even if we have a passive income stream.
Never know whether that stream would slow to a trickle or dry up totally.
Well, happy thoughts for now.
Huat ah!
References:
1. How much in our emergency fund?
2. Worried as dividends and interest income reduced.
OCBC and UOB still need to catch up with DBS, another way of saying this is OCBC and UOB have more room to grow!
I am vested in both and enjoying the higher dividend :)
Hi Daniel,
DBS is definitely showing OCBC and UOB that they can do better. ;)
OCBC and UOB should study DBS and see if there is something DBS is doing differently.
Having said this, I believe that the opening up of China will benefit OCBC greatly as they have always had a Greater China strategy.
UOB should benefit enormously from their acquisition of Citibank's business in 4 key South East Asian economies especially when South East Asia is expected to grow economically even as recession fears dominate the USA and Europe.
I expect all three local lenders to continue generating income for many years to come. :D
Hi AK,
Looking forward to seeing you dressed in long pao in the upcoming AK and Friends! :D
Hi keng,
If Mediacorp is going to be an event sponsor, maybe. LOL. ;p
CDG just dished out special dividend too. Huat ah!
Hi Betta man,
Yes, I saw that too.
I might blog about it.
Huat ah! :D
Dear AK
I did expect this joyful post from you and you did not disappoint me!
The rather muted or even slightly negative reaction in the market was expected! “The good news was sold”!
The recent uptick in the US PCE figures are weighing on global markets. The banks are likely to be sold further in the event of recessionary fears raising their head again
The rising two and ten year yields, the falling commodity prices including copper, the dollar index going slightly higher are all reflecting this.
If the ten year goes above 4 and the yield curve inversion, already at its deepest, worsens- we will see the markets drop further
Technically, we are just above support levels
I added UOB last week post results and will be adding all three banks gradually plus buy my handpicked REITS, without fear or hesitation, slowly but steadily if the markets go lower
Locking into yields at this level is a fairly safe option for regular income
Regards
Garudadri
Hi Garudadri,
Most joyful! :D
As an investor for income, price fluctuations don't bother me as much since I am more concerned with the income my investments generate for me.
As long as they pay me like I expect them to, I am happy enough. :)
Everything being equal, like you, I would welcome lower selling prices from Mr. Market.
I hope I am smart enough to fill up my war chest so as to be ready for the next time Mr. Market goes into a depression which is bound to happen at some point.
Well, as a retiree, I also hope I am fortunate enough to have the resources to fill up my war chest in a timely manner. ;p
Hi AK,
would you have any comments regarding the dividends recently declared by Centurion?
I find them to be disappointing for the following reasons:
a) executive director (and ceo, whom isn't a director) has increased remarkably from 2020 to 2022.
b) in terms of income and free cash flow, the company actually did better y-o-y.
I wonder if there are any blind spots in my assessment. You mention that it is underperforming in your portfolio; I could only assume that it refers to its share price. The business, as the numbers suggest, seems to be thriving.
Centurion is a substantial investment of my portfolio and I intend to question management about it.
Hi lbs,
I was pretty disappointed with Centurion Corporation when they did not reward shareholders with a larger dividend although they emerged financially stronger from the COVID-19 pandemic.
Loyal shareholders who stuck with them without any dividends for 2 years during the pandemic did not get any appreciation. Sadness.
I was also very concerned with their high level of debt in a rapidly rising interest rate environment.
So, I aggressively reduced my exposure in the middle of last year and used the funds to increase my investment in OCBC instead.
Centurion Corp still seems like a pretty good business, to be honest, but from an investing for income perspective, it just isn't that attractive to me anymore.
You might be interested in the blog where I talked to myself about my reduced exposure to Centurion Corporation. Link provided below.
Reference:
Centurion Corporation: A smaller investment.
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