Worried as dividends and interest income reduced.

Regular readers know that I am a worrier.

Yes, it is true that I am somewhat mental.

As my parents are not financially savvy, I worry about them constantly.

This is one enduring worry which has only become worse over time.

I am more worried about my dad than I am about my mom because he spends money too freely.

There is no point in nagging at him which was something I was prone to doing in my younger days.

I remember when I told him to sell two of his club memberships away some 20 plus years ago, he got angry with me and yelled that he wanted a lifestyle in retirement.

Well, he is trapped into paying $500 each month in club subscriptions even though he hardly visits the clubs.

It is worse than buying insurance policies which he doesn't need because there is no way to terminate these memberships other than to sell them away.

Of course, club memberships are not as popular as they were once upon a time and it would be harder to sell them even if he wants to do so now.

If my dad regrets not listening to me donkey years ago, he hasn't told me.

All of us have pride which can be a good thing but it can also be a bad thing.

My dad is in his mid seventies and it is too hard for him to change his ways.






I blog about my parents from time to time.

The last time I did this was in October last year when I talked about how much passive income I needed?

In that blog, I talked about my decision to double financial support for my parents to about $40,000 a year.

With dividends from my investments reduced this year, I might have to dip into my emergency fund to keep the promise.

Of course, we would know for sure by the end of the year when I calculate my total dividends for the full year.

It is my responsibility to make sure that my parents don't have to worry about money.

If our government is right about the negative economic impact of the COVID-19 pandemic lingering on for years to come, I must be prepared that I might have to continue dipping into my emergency fund as my dividend income falls short.






Adding to this development, lately, I have been wondering if I must give even more financial support to my parents?

This happened after a recent visit back home and a conversation I had with my parents.

My dad complained about the paltry interest rates when he renewed his fixed deposits.

Banks' shrinking interest rates on my dad's shrinking savings.

My dad complained about the former while my mom complained about the latter.

Uh oh.

I don't know if some of you might be familiar with such a scene or something similar to such a scene.

Well, as expected, in my case, it quickly escalated into a yelling competition.

When two people who have been married to each other for half a century fight, oh, they have so much material to draw on.

All that baggage.

I will not share the details.

Too much and, really, what's past is past.

Also, we have to accept that no one is perfect and if we cannot look past that and see the good in each other, life becomes almost unbearable.

Of course, when emotions run high, people become unreasonable but the problem is that they think they are reasonable.

OK, you get the picture.






Anyway, to help address my mom's complaint about my dad's shrinking savings and also to help address my dad's concern about shrinking interest income, I made my dad an offer.

I told my dad that at his age, it is about not taking on too much risk while trying to make his savings last longer.

I know he doesn't want to be reminded of the bigger financial support I am giving them.

Old man has pride.

Of course, as children, we should want our parents to age with dignity too.

So, I made him an offer that I felt he would respond well to.

I introduced him to AA REIT which, of course, I increased exposure to more than a month ago.

I took him through the pros and cons of the investment and offered to let him take over my recent investment in the REIT at $1.15 a unit which was what I paid.

I told him that, conservatively, it could give him a return of 7% per year at that price.

He took the offer and somehow managed to make it looked like he was helping me out.

Like I said, old man has pride and if it makes him feels good about himself, so be it.

That was how I partially diffused the tension that day.

Only partially but I shan't bore you with everything else.

家家有本难念的经.






If AA REIT's unit price should plunge below $1.15 for some reason and if my dad should decide to sell, I would still pay him $1.15 a unit.

So, his investment in AA REIT is like a risk free fixed deposit but with some upside.

I am sure I do not have the right answer to every problem.

I also do not have unlimited financial resources but I will always put my parents' interests before my own.

We are not perfect but this imperfect son will do his best for his imperfect parents.

This is as close to perfect as is humanly possible.






Related posts:
1. Improving retirement funding adequacy for my dad.
2. Retirement adequacy for late bloomers.
3. How much passive income do I need?
4. The most dangerous crisis and what should we do?
5. AIMS APAC REIT investment is larger now.
6. Dad's whole life insurance policy.

SembCorp Industries (SCI) investment larger now.

There were a few comments from readers regarding the rights issue by SembMarine (SMM) and also how SembCorp Industries (SCI) would distribute its stake in SMM as dividends to SCI shareholders.

Basically, SMM is issuing rights in a 5 for 1 rights issue priced at 20 cents per rights.

Depending on the response to the rights issue, each SCI shareholder will get between 427 to 491 SMM shares for every 100 SCI shares they hold.

The question some might ask is "how much is each SMM share going to go for after the exercise is over"?

Well, your guess is as good as mine.

If we use the rights issue price of 20c per rights share, getting 427 SMM shares means getting $85.40 worth of shares.

If we were to buy SCI at $1.95 per share today, the implication is that our cost for what is the new SCI is approximately $1.10 per share.






The biggest drag on SCI's performance for so long has been the loss making SMM.

Like I said in reply to a reader recently:

"Things have been bad for oil and gas for way longer than expected and that has impacted SembMarine really badly."

Full comment: HERE.

This exercise has been called a "demerger."

Basically, SCI will divorce SMM while SCI shareholders will become SMM shareholders if they are not already so.

It is like SCI saying to SMM:

"Take the money and get out of my life!"

And maybe SMM should say or sing:

"Do you think I will crumble?

"Do you think I will lay down and die?

"No, no, not I!

"I will survive!"






Anyway, some readers will remember that an important reason why I was attracted to SCI was its utilities business.

In a reply to another reader recently, I said:

"I have a smallish investment in SCI which I am holding onto with the belief that its energy and waste management businesses will remain resilient."

and also:

"With urban (development) being a small component, SCI is more of a utilities company after the whole exercise is over and should be seen as a defensive investment."

Full comment: HERE.

As an investor for income, I like reliable recurring income.

So, after not doing anything to my investment in SCI for a long time, I increased my investment in SCI today.

Upon completion of the exercise, SCI investors can choose to keep their investment in SCI's mainly utilities business and sell their new or enlarged investment in SMM if they so desire.

SMM is still loss making as the environment remains very challenging for oil and gas businesses.

However, those who believe that the oil and gas sector is simply in an extended down cycle should hold on to their investment in SMM while they wait for the cycle to turn back up.






Of course, this blog would not be complete without a comment on SCI as an investment for income.

With loss making SMM out of the way, SCI is likely to be more profitable in future, all else remaining equal.

A DPS of 5c might even be viewed as conservative then.

Even so, at $1.10 a share, a 5c DPS would translate to a dividend yield of about 4.55%.

Of course, depending on the assumptions we make, we would get different results.

However, to be realistic, we could first see a reduction in dividends with the COVID-19 pandemic's negative impact on the global economy.

"Utilities and marine group Sembcorp Industries expects the performance of its energy business to be markedly lower than last year due to reduced demand and falling prices.

"Sembcorp said on Monday (May 18) that while its energy operations continue to be supported by long-term contracts, the impact of the pandemic and the reduction in economic activity amid lockdowns have hit the business.

"Power demand in Singapore, India and Britain declined by about 10 to 25 per cent in April compared with the same month last year, the company noted."

Read full article at: The Straits Times.






I have doubled the size of my smallish investment in SCI today.

I am mindful that although there is an investing for income angle here, there is also a speculative element.

So, I will remain cautious and not throw in everything including the kitchen sink.

For a quick summary of the whole exercise, watch the short video by CNA below.

"Sembcorp Marine unveiled plans to raise S$2.1 billion through a rights issue backed by Sembcorp Industries and Temasek Holdings."