OCBC & UOB follow DBS: Special dividend?

What a great way to start a morning!

What a great way to start the week!

In my most recent blog, I talked to myself about my plan when it comes to fixed income.

However, I also mentioned that I have a significant exposure to equities as fixed income alone would not get us to financial freedom.

For most of us, this is the hard truth.

We must invest in bona fide income generating assets and businesses if we want to be financially free one day.

The decision to invest in DBS so many years ago has been paying dividends, literally.

Investing in OCBC a little later and then in UOB in the COVID-19 bear market has been very rewarding too.

Now, I wonder if OCBC and UOB might follow DBS and reward their shareholders a little better?

Let me try asking my mental bowling ball which thinks it is a crystal ball.

Compared to UOB, there is a better chance of OCBC following DBS in declaring a special dividend as OCBC's CET-1 ratio is more robust.

Still, if UOB wanted to, they could declare a special dividend too as their CET-1 ratio, although not as strong, is pretty decent.

Don't hold your breath though as this is what we got from a mental person asking his mental bowling ball for directions.

Coming back to DBS, a special dividend of 50 cents a share is pretty impactful to me.

This is especially when DBS is one of my largest investments today.

I think I might give myself a little treat.

Won't overdo it since 2023 still has a long way to go and we don't know how the rest of the year is going to turn out.

Like I shared in my blog on my full year 2022 passive income, I am still expecting zero growth in my 2023 passive income.

This is just me being realistic as some of my investments would probably be generating lower income for me.

CapitaLand China Trust has already reported a lower DPU, for example.

Oh, well.

Happy thoughts for now.

To all fellow DBS shareholders, hip hip huat ah!

Recently published:
1. SSB, T-bill, CPF and UOB ONE.
2. Changes to portfolio (Jan 23.)

References:
1. Largest investments updated.
2. 2022 passive income.
Latest YouTube video by AK:

SSB, T-bill, CPF & UOB ONE. Use them. My plan.

A few months ago, I said that it made more sense for me not to do voluntary contributions to my CPF account and to buy Singapore Savings Bonds (SSBs) instead. 

That was when Singapore Savings Bonds were offering 10 year average yields of more than 3% p.a. and it happened for 3 months in a row in 4Q 2022.

Money meant for voluntary contribution to my CPF account in January 2023 were all very nicely deployed into SSBs without any leftovers.

This year so far, SSBs have been offering lower than 3% p.a. in 10 year average yields which is less attractive than the what my CPF account offers.

Of course, what the CPF offers each of us is different based on our age group and how much we have in the Medisave Account. 

The percentage allocation to the Ordinary Account, Special Account and Medisave Account would be different from person to person and could result in a different average interest rate for each of us.

Anyway, before I veer farther off track, if the SSBs continue to offer a lower than 3% p.a. in 10 years average yield for the rest of the year, I am not worried as I would resume voluntary contribution to my CPF account then.

I could do this in the month of December instead of waiting till the new year which was what I had to do in years past.

This is because I have yet to do any voluntary contributions this year, of course.

So, one month in advance for a one month extra interest income.

For now, I will wait and see what the SSBs will offer in the months ahead all the way till December.

After all, the Fed is not done raising interest rate yet with probably a couple more hikes incoming.  

I know many are saying that inflation has been tamed but if inflation in the USA remains elevated, there could be more than just a couple of 0.25% hikes left to go. 

In such a case, we could see yields going higher especially if the US dollar strengthens against the S$.

In case you are wondering why the strength of the S$ is a relevant consideration, it is quite simple. 

A stronger S$ means our country would not have to offer higher yields to compensate bond holders because the S$ is more valuable and bond holders would gain from the exchange rate.

I am veering off track again.

Anyway, what is the plan or, more accurately, my plan?

1. Set aside $42K from my passive income generated this year for voluntary contribution to CPF in 2024.

Money meant for voluntary contributions can be deployed in December 2023 while money for top up to the Medisave Account will be deployed in January 2024.

2. Wait and see if SSBs offer more than 3% p.a. in 10 year average yield in the coming months.

If they do, deploy funds meant for the CPF in 2024 into SSBs instead.

If they don't, use the funds to get 6 months T-bills as long as the yield curve remains inverted which means the front end of the curve remains more rewarding.

Total amount to be deployed this way is $38,000.

3. The strategy of using 6 months T-bills can only extend till June or July 2023 because I will need the funds to be ready for voluntary contribution to my CPF account in December 2023 or January 2024.

If SSBs continue to offer lower than 3% p.a. in 10 year average yield from August to December or the last 5 months of the year, any money meant for CPF voluntary contribution coming in after July 2023 will have to sit in my UOB One Account.

I do not enjoy the highest tier interest rate offered by UOB One Account as I do not have any earned income to credit. 

However, it still offers a relatively attractive interest rate at least for money which cannot be locked up for a few months.

All I have to do is to spend $500 on the UOB One Card and have 3 monthly GIRO transactions.

I meet these conditions every month, anyway.

If you are new to eavesdropping on AK, I do have a significant exposure to equities while the CPF, SSBs and T-bills together form the fixed income component in my portfolio.

See:
Banks and REITs dividend machines? T-bills, SSBs and CPF?

I am mental and this blog is really more for myself as I don't want these thoughts to keep circulating in my mind.

You have been warned.

I use my blog as a "Pensieve."

What is a "Pensieve?"

You didn't watch the Harry Potter movies?

"The Pensieve was a magical device used to review memories." 

Source: Harry Potter Wiki.

My mind feels lighter now.

Recently published:
Changes to portfolio in Jan 23.

Related blogs:
1. CPF or SSBs?
2. Growing passive income?
3. $1.1m in CPF savings!