4Q 2024 passive income. Prep for 2025.

Happy New Year!

Another quarter is behind us and it is time for another update.

If you are following me on YouTube, you might have seen the update I provided in my YouTube community recently:

My dad is still in hospital.

I have yet to read the comments I have received in recent days on YouTube as I am not feeling very sociable.

However, recognizing the signs of oncoming depression, I decided to do some blogging.

Blogging is therapeutic to me.

I am sure there are many readers who are very concerned for me and would ask me not to worry about updating the community.

Don't worry.

I am doing this as therapy for myself.

So, 2024 has ended and on the investment front, it has been kind to me.

The stock prices of DBS, OCBC and UOB have outperformed.

As they form more than 45% of my portfolio, this has a big positive impact on my portfolio's market value.

The gains more than make up for the losses in IREIT Global and CLCT.

Of course, all of these are just on paper.

So, just saying as I am sure some readers, whatever their reasons, would be interested to know.

All positions are still generating income for me.

Some have asked me what should they do with their investment in Centurion Corp as the share price has shot through the roof.

It would seem like I have made a mistake by selling my investment in Centurion Corp and using the money to add to my investments in the local banks so many moons ago.

Well, I cannot and don't want to give advice but the reasons I gave for selling back then are still valid.

Centurion Corp suspended dividends during the pandemic and was slow in restoring dividends even though they emerged from the pandemic with a stronger balance sheet.

However, they had no trouble with immediately rewarding their directors generously.

So, I decided to add to my investments in the local banks instead as they have a long track record of rewarding shareholders during good and bad times.

Their very strong balance sheets in comparison to Centurion Corp's help to ensure that their dividends would not be suspended if we should see another pandemic.

Our local banks have shown themselves to be more shareholder friendly too.

They are able and willing to reward shareholders fairly, if not generously.

Always revisit our reasons for investing in a certain entity and if the entity is unable to deliver anymore, it is time to let go.

So, sell, hold or buy would depend, to a large extent, on our motivations.

I thought I would end 2024 without making any purchase but I ended up buying more of Wilmar and also nibbled at Alibaba.

I talked about this in my last blog post and if you are interested in finding out more, have a read. 

I made a video about this too:

Not a big deal, really.

My investment in Alibaba now forms less than 0.5% of my portfolio.

My focus is still on passive income generation and Alibaba doesn't quite fit the bill.

As a retiree who depends on dividends from his investments for a living, Alibaba is an interesting and somewhat speculative position.

Nothing more.

I talked about this my YouTube community not too long ago as well,

If Alibaba should see its stock price decline 5% to 10% from here, I would probably add to my investment but it would remain a very small investment.

In my last blog post, I identified a weak uptrend with a gently rising support line but if that were to break, Alibaba's share price could go lower.

A retest of HK$72 support level is not impossible since we could be seeing the formation of a head and shoulders pattern which would give us an eventual downside target of HK$72 or so.

My charting skills are a bit rusty.

So, beware of tetanus.

Now, the numbers:

Q4 2024: $28,734.99

FY 2024: $ 234,439.46

This is more or less the same as FY 2023 which delivered $231,495.19

Despite having sold most of my investment in Sabana REIT in 1H 2024, passive income on a portfolio level did not reduce in 2024. 

DBS, OCBC and UOB really did all the heavy lifting in 2024 as they paid higher dividends.

In 2025, I expect passive income to come in lower due to a much smaller investment in Sabana REIT and also the expected 25% reduction in DPU from IREIT Global as they reposition their Berlin asset.

A 4% or 5% reduction in 2025 passive income on a portfolio level would not surprise me.

Of course, we could see higher dividends from DBS, OCBC and UOB in 2025 as they have excess capital which could be returned to shareholders.

Could be special dividends which means they are non-recurring but that would be good enough to provide some relief.

Once IREIT Global gets their Berlin asset up and running again in 2026, income generation should receive a leg up as the property has attracted 2 tenants so far offering to pay 100% higher rent than the master tenant which vacated the property.

Oh, I will also have to remember to top up my CPF MA before the end of the month.

That's $4,000 to be set aside.

Risk free return of 4% p.a. and the interest earned pays for my medical insurance.

Of course, if you have been following me for many years, you would know all about this.

Let the government pay for our insurance.

Finally, I will maintain my T-bill ladder and strengthen it whenever I have spare cash on hand.

I will only dismantle it when I see Mr. Market being overly pessimistic and offering to sell stocks of businesses I like on the cheap.

All of us can be and should be financially more secure.

If AK can do it, so can you!

Wilmar at $3.00 per share. More on Alibaba.

Quite a few readers and viewers have been asking me on and off this year whether I was adding to my investment in Wilmar.

I think more people asked me when Wilmar's stock price went down to $3.20 and $3.10 per share.

I kept saying that I was waiting for $3.00 per share.

Briefly in August, I thought I might get it but it didn't happen.

Well, it finally happened.

My overnight BUY order at $3.00 per share was filled.

Wilmar International is very undervalued if we were to look at the sum of its parts.

Its majority held YKA in China has a larger market cap than Wilmar in Singapore.

So, buying Wilmar today, we are getting the rest of its businesses for free.

This is something I have said for a long time.

Of course, a stock could stay undervalued for a long time too.

Those of us who track the counter know that insiders are consistently adding to their positions.

Historically, at $3.00 per share or lower, we have seen even more insider buying.

Wilmar's business in China is not performing as well as before as the Chinese economy is still suffering from the meltdown of its property sector.

Consumers are still cautious and are not spending as freely as before.

Historically, Wilmar also did share buybacks during times of lower earnings as its share price got punished as a result.

At current prices, downside is probably limited.

I also like that Wilmar has been consistent in paying dividends through good and bad times.

They did not suspend dividends during the pandemic, for example.

The dividend per share of 17c isn't demanding as expectation is for earnings per share to be about 30c in 2025.

Buying at $3.00 per share gives me a dividend yield of 5.66% and an earnings yield of about 10%.

Of course, readers who have been watching my  YouTube videos on the banks would be familiar with the concept of earnings yield. 

Wilmar is still one of my larger investments and it fits my primary strategy to invest in bona fide income generating assets which will pay me through good and bad times.

I thought I would end 2024 without buying any equities but after initiating a position in Alibaba Group last week, I have added to my position in Wilmar today.

Many regular readers were curious why I invested in Alibaba Group last week.

I have made videos about Alibaba and how I thought it was trading like a value stock.

Despite that, I wasn't ready to jump on the bandwagon because of policy risk in China.

Alibaba also didn't use to pay a dividend but not too long ago, they started to pay dividends, very little in dividends.

The dividend yield is less than 2% with a payout ratio of about 20%.

So, it is a very sustainable dividend.

Alibaba has very healthy cashflow and very strong balance sheet.

Instead of paying more dividends, Alibaba has decided to do share buybacks.

I must agree that doing share buybacks at such depressed valuations is probably a good idea.

Alibaba has already bought back some 10% of its outstanding shares, if I remember correctly.

All else being equal, share buybacks will lead to earnings accretion and we should see a lower PE ratio.

Paying HK$80 per share today is a better deal than paying HK$80 per share two years ago.

Having said this, Alibaba is a small position in my portfolio and although I could add to my position if the stock price declines another 5%, it will probably remain small.

Why 5%?

There is some support for a mild uptrend if we connect all the lows in its stock price seen this year.

Even if there is another 5% decline in its stock price, this mild uptrend would still be intact.

If the support holds, the worst could indeed be over for Alibaba.

When a viewer asked what the stock price for Alibaba is going to be like in future, I said I didn't know how the price is going to move.

However, I know that the 13 years median PE ratio is about 30x which means that if Mr. Market decides to like Alibaba again, all else being equal, its stock price could double from here.

Well, I wouldn't hold my breath.

Undervalued can stay undervalued for a long time and it certainly seems to be the case for Alibaba.

Whether stocks or socks, just like Warren Buffett, I like to buy when they are marked down.

Merry Christmas!

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