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2Q 2023 is a good quarter for dividends.
My war chest has begun filling up last month.
This is just in time too.
In recent blogs and videos I produced, I kept reminding myself that I would only be nibbling at UOB if its stock price fell to $28.
This is based on what I saw in the chart.
Immediate support is at around $28 a share.
If I were to be more exact, based on the weekly chart, it is at $27.80 a share which was the low formed on the 5th of June last year.
It also looked like the beginning of a neckline of a double bottom in the weekly chart.
In less than two weeks, the price of UOB's common stock has fallen from $30.15 to $28.22 a share.
That is a pretty big decline of almost 6.5%.
If I didn't have any exposure to UOB yet and if I have been waiting to get in, I would do so now.
However, I wouldn't go all in.
Fundamentally, at $27.80 to $28 a share, we would be paying around a 14% premium to the bank's book value and getting a dividend yield of around 4.8% at these prices.
Not too shabby.
I already have a significant investment in UOB but I would probably be nibbling too.
Nibbling and not gobbling.
I wouldn't go all in because bearish sentiments could be pervasive and this could drive the stock price lower to the next support at $26.90 to $27 a share.
Buying at these lower prices would mean paying a lower 10% premium to the bank's book value and also getting a higher 5% dividend yield.
If that support is ever tested, I would be buying much more then.
Technical analysis is about probabilities and never about certainty.
It tells us where the support and resistance levels are but it doesn't tell us if they would be tested or if they would hold.
This is my own plan and you should have your own plan too.
If AK can do it, so can you!
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4 comments:
hi AK,
IREIT Global has been paying good dividends. However I noticed the payout for last few round consists of about 1/3 from income distribution and 2/3 from capital. Do we need to be concern of this ratio as the capital distribution might run out some day?
Hi DL,
I believe the distribution is split into income and capital distributions because certain investors have to pay income tax on profits if they were to sell units of the REIT.
These are usually institutional investors, if I am not mistaken.
The distribution on the whole is still derived from the operational income of the REIT although IREIT did sell an asset last year. It was a carpark, if I remember correctly.
However, I would add that, unlike most S-REITs, IREIT Global has been retaining 10% of distributable income for many years which is the reason for its relatively strong balance sheet.
So, if the REIT wishes to do capital distributions from retained earnings at some point in the future, they can most certainly do so.
Hi AK,
Ah I see the retained earning also consider capital distribution. That make better sense. How much do you forecast the next dividends for the year? :)
Hi DL,
I will leave the forecasting to the analysts. ;p
There are a few things I will say.
With inflation still very strong in Europe, rental escalation is likely to continue since IREIT's contracts link rents to the CPI.
Darmstadt Campus should continue to be gradually backfilled and would help to restore lost income from the previous tenant which vacated in November last year.
The Euro has strengthened against the Singapore Dollar in recent weeks and it would be interesting to see if it stays strong until the next income distribution.
Let the manager run the REIT.
Let the analysts do the crystal ball gazing.
Let AK collect dividends. ;p
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