First REIT: This one is for keeps.

You might have experienced deja vu before.  

It has happened to me countless times.  

Psychic?  

Maybe but sometimes, things just fall into place in the strangest ways.

Today, I received a payment voucher from my broker on income distribution from First REIT.  

This is not a very glamorous REIT but I count it as one of the strongest in my portfolio.  

The generous distribution put a smile on my face.

Then, I wondered if I should blog about First REIT, using it as an example of the type of REIT we want to have in our passive income portfolio.  

I got home, checked my blog and found two comments from anonymous readers, both stating that they do not like REITs.  

So, that made up my mind for me.






I first bought some units in First REIT in 2007 for an average price of 75c per unit.  

Through good and bad years, it faithfully distributed income to unitholders every quarter:

In the first year, it distributed 7c per unit for a yield of 9.33%.

In the second year, it distributed 7.62c per unit for a yield of 10.16%.

In the third year, 2009, it distributed 7.44c per unit for a yield of 9.92%.

Throughout the years, First REIT did not have to raise funds from unitholders as its gearing remained conservative at slightly more than 15%.  

The management did not act irresponsibly, expanding recklessly during times when credit was easily available.  






Its NAV today is about 98c per unit.  

It is still trading at a discount to NAV although, at today's closing price of 82.5c, not excessively so.  

At the current price, the yield (assuming a distribution of 7.5c per annum) is still a respectable 9%.

You might remember that I said I bought more units of First REIT at 42c during this last crisis.  

I have received the full distribution of 7.44c per unit for the year 2009.  

This translates into a yield of 17.7% (this plus a capital appreciation of almost 100%)!  

In five and a half years, I would have recovered my capital (everything remaining equal).  

This one is for keeps.





First REIT, I believe, is a powerful example of what makes a good investment in REITs for the purpose of passive income generation.  

Let us leave out the units I bought at 42c as that happened under extraordinary circumstances and is unlikely to be repeated.  

Considering just the units I purchased at 75c, it is more than likely that I would continue to receive 10% yield per annum.

Human beings like to classify things, organising things into groups.  

This is not a bad thing in itself but having a system of classification helps us to think more readily in general terms, making quick generalisations in the process.  

This encourages economy and masks differences, differences which could potentially separate the gems from the trash.  

So, next time, if you see what seems to be a heap of trash and think of passing it by, think again. 





Related posts:
High yields: Successes, failures and the in betweens.
Seven steps to creating passive income from the stock market.
High yield portfolio.

The same three counters.

Healthway Medical touched 17c, the initial resistance identified yesterday with the MACD indicating a return of positive momentum.  However, that the price closed unchanged despite increased trading volume indicates that many holders are making use of the upmove to lighten their positions.  A rising MFI shows increasing buying momentum and this is some way from being overbought, suggesting that there might be more upside.  17c is still the resistance to watch.  17.5c is the XR eventual target, the equivalent of the CR eventual taget of 19.5c.

Golden Agriculture closed at 53c, supported by the 20dMA.  This pullback is on the back of lower volume, suggesting that the decline is due to weaker holders being shaken out and not due to any drastic distribution activity.  However, with the MACD forming a bearish crossover with the signal line and the Stochastics continuing its decline, we might see the 100dMA being called upon to act as support yet.  I would accumulate then.

Saizen REIT formed a rare white candle today as price closed at 16.5c with a relatively surprising large buy up in the last trade of the day.  The rising 20dMA and 50dMA have merged to form support at 16c, suggesting that this is probably a very strong floor for the counter.  MFI has formed a higher low, marking sustained positive buying momentum.  MACD marks a return to positive momentum and the Stochastics has turned up as well.  Is this the beginning of something more interesting for believers of Saizen REIT or is it another red herring?  Time will tell but my investment in Saizen REIT is informed by my FA and I am holding with conviction. 

Initial resistance is at 17c, a recent candlestick support turned resistance.  Ultimate resistance for the week is provided by the descending 100wMA at 19.5c.