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1Q 2024 passive income: Wilmar, REITs and banks.

Tuesday, April 2, 2024

Time flies and it is time for another quarterly update.

Before I start on the update proper, I just want to say a few words about Wilmar International.

I received a few comments from readers on Wilmar and they asked if I had any updates on the business.

Some would like to know whether it is a good time to add to our investment in Wilmar.

Wilmar remains deeply undervalued and my past analyses are still valid.

Value is easy to see but where stock prices would go is much harder.

In terms of valuation, buying Wilmar today is inexpensive.

However, cheap could get cheaper and since I already have a significant investment in Wilmar, I do not feel any urgency to buy more.

I am simply waiting and if the stock price hits $3 a share, I would buy more.

That is an important support level and it is also where insiders typically add to their positions.

Undervalued could stay undervalued for a long time.

So, I like that Wilmar pays meaningful dividends while waiting for value to be unlocked.

Now, I will talk to myself about passive income received in 1Q 2024.

Like I have said before, 1Q and 4Q of the year are always weak in passive income generation as most businesses pay dividends in 2Q and 3Q of the year.
1Q 2024 is no exception.

It is even weaker this year because I received lower income from my investments in REITs which is not unexpected.

I did not take part in the rights issue to strengthen the balance sheet of AA REIT.

IREIT Global generated lower income as they their property in Darmstadt is still mostly vacant.

Sabana REIT generated lower income as they retained 10% of distributable income to cover costs of manager internalization. 

Capitaland China Trust generated lower income as China struggles even as the RMB weakens.

1Q 2024 passive income came in at $39,142.25

This is some 5.4% lower than the $41,364.36 received a year ago. 

In terms of absolute dollars, it is a reduction of $2,222.11 or $740.70 per month.

I think I will live. ;p

Before I forget, I should also say that I expect to receive less passive income a year from now, all else being equal, as I sold a significant portion of my investment in Sabana REIT recently.

Since Sabana REIT pays half yearly, my passive income 6 months from now should also be impacted but higher dividends from my investments in DBS, UOB and OCBC should provide a cushion.

Although passive income in 1Q 2024 came in lower, I am still quite comfortable.

I was worried during the pandemic because dividends and interest income reduced and pretty drastically too.

Regular readers know that I have a big emergency fund but if the pandemic lasted much longer, even that could get depleted.

Savers are fortunate that interest rates are higher now which means we are receiving meaningful interest income.

This isn't something I have blogged about before because for most of my blogging years, interest rates were too low to make any meaningful contribution.

These days, I receive interest income of approximately $20,000 a year.

This is not accounted for in my quarterly update.

I thought this is worth a mention because a higher interest rate environment isn't all that bad.

Charlie Munger said before that it takes character to sit on money and do nothing.

There are worse situations to be in.

So, what am I doing as my cash position grows.

I will just wait for the next investment opportunity.

If AK can do it, so can you!


j said...

What is your view on the banks eg DBS as their prices swing so much before ex-dividend. Should we just sell and buy back after dividend. That is, Don't get the dividend but make capital gain, then reinvest in the same stock after dividend payout.

AK71 said...

Hi j,

For sure, you can trade stocks and make some money if you are good at it.

I was more active as a trader in my younger days.

I don't do that as much these days as I mostly invest for income and wait to receive dividends. :)

Wilson said...

Congratulations on your passive income. Well done.

AK71 said...

Hi Wilson,

2023 was kind to AK. Thank you. :)

teoyh said...

IREIT is not doing well and the share price has dropped to almost all time low with reduced dividend. Do u think it is going down the same fate as PRIME/MUST/KORE due to deteriorating office space, though IREIT properties are not all office but has some retail space ?

AK71 said...

Hi teoyh,

If I think that IREIT Global is going the way of ManuLife US REIT, I would have binned it a long time ago. ;p

IREIT Global is much stronger financially and its balance sheet strength beats the US office REITs you listed by a handsome margin.

IREIT Global is managed very prudently and I am quite happy to be paid while I wait.

However, if the investment is making you lose sleep, you might want to rethink your investment.

Two questions for investors losing sleep...

Chenheyuan87 said...

hi ak.. will you be getting this new upcoming etf to further diversify your banking sector? "LION-OCBC SECURITIES APAC FINANCIALS DIVIDEND PLUS ETF"

AK71 said...

Hi Chenheyuan87,

Singapore has the best banks in Asia.

No point diversifying into second liners.

Could be "diworsifying." ;p

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