ComfortDelgro: Special dividend! Earnings jump!

In my blog detailing changes made to my investment portfolio in January 2023, I said that I increased my exposure to ComfortDelgro.

In that blog, I said that ComfortDelgro's fundamentals looked to be stabilizing and, technically, it looked like ComfortDelgro's stock price was bottoming too.

If you missed that blog or need a refresher, see:
Changes to portfolio in Jan 23.

ComfortDelgro has just reported an increase of 63% in 2H earnings, year on year.

Operating costs for the full year increased 6.3% while operating profit increased 35.1% which is pretty impressive, given the many challenges ComfortDelgro is facing.

Higher dividend income from ComfortDelgro is going to be pretty impactful as it is still one of my largest investments.

ComfortDelgro has declared a final dividend of 1.76c per share and a special dividend of 2.46c per share.

ComfortDelgro has a huge cash pile and, if they do not have better use for the money, paying more generous dividends to shareholders cannot be a bad idea.

Technically, ComfortDelgro is now testing immediate resistance at $1.20 which is provided by a declining 50 days moving average.

If this resistance should be broken, there is a chance that the declining 200 days exponential moving average which is currently at $1.30 could be tested next.

There are multiple resistance levels and although analysts covering ComfortDelgro seem to believe that the worst is over with most having mouth watering target prices for ComfortDelgro's common stock, it could take quite a while before we see those levels.

That is from a technical analysis perspective, of course.

Fundamentally, ComfortDelgro should see a gradual improvement in earnings as we continue to see a return to pre COVID-19 pandemic norms.

So, from this perspective, to expect a mean reversion to happen sometime in the future isn't unreasonable.

Still, we want to stay grounded in our expectations.

If we are investing for growth, at this point, it seems that ComfortDelgro is probably a poor choice but as an investment for income, ComfortDelgro is probably still able to pull its own weight in any investment portfolio.

I am not going to hold my breath if I am looking for massive capital gains here, for sure.

Instead, I will celebrate the higher than expected dividend for now.

Reference:
Add CDG or the banks?

T-bills with CPF and SRS in March 2023.

So far, I have applied for T-bills mostly with cash, using mostly money from maturing fixed deposits.

As more and more money got locked up in T-bills as well as fresh fixed deposits with higher interest rates, I  reached a stage where I didn't have anymore cash to apply for T-bills.

Then, I found some money playing truant at home which I quickly put to work in T-bills in February.

Unfortunately, unless I had a money tree at home, it would be impossible to find more money playing truant at home.

I still want to continue getting T-bills in order to maintain a meaningful exposure to fixed income especially during this period of much higher yields.

Of course, until a few months ago, for many years, even as a retiree, I was doing voluntary contributions and top-ups to my CPF account to achieve this goal.

I have always thought of the CPF as an investment grade government bond which offered relatively attractive yields while having an annuity angle.

So, although it might seem like I have recently developed a fascination for fixed income, I really haven't.

It has always been an important part of my investment portfolio.

Anyway, I looked at how much money I might have left in my SRS account and CPF-OA as we can buy T-bills using money in these accounts.

My SRS account recently got a leg up as I sold my investment in SATS, booking a modest capital gain in the process.

My CPF-OA still has some $52K available for professionally managed products.

I will split the $18K available in my SRS account into 3 equal parts and apply for the 3 T-bills on offer in the month of March.

These would be non-competitive bids as I suspect that the cut-off yields for all the T-bills to be auctioned in the month of March would be much better than the SRS interest rate.

This is one prediction my bowling ball which thinks it is a magical crystal ball is going to get right, I feel.

Yes, I said to my bowling ball, "You win liao lor!"

The $52K available for investment in my CPF-OA, I will make a competitive bid for the T-bill closing on 1 March.

I am bidding very close to a 4% p.a. yield this round as I see inflation data coming in strong and also a strengthening US$ against the S$.

As the application is being made online, the cost really isn't that high like before.

Online application saves me a trip to the bank and, quite possibly, a long time in a queue.

It is very fortunate that DBS has made online application for T-bills using CPF-OA money available.

If successful, I would lose only an extra month's worth of interest income (i.e. for the month of March) from CPF-OA as the T-bill will mature in early September. 

This would give me ample time in the month of September to transfer the money from the CPF-IA back to the CPF-OA so that I would not lose another month's worth of interest income for the month of October.

In total, I would lose 7 months' worth of CPF-OA interest from March to September.

This is unlike the 1 year T-bill which I applied for in January using CPF-OA money.

For that T-bill auction, my bid yield was just a bit more than 3.4% p.a. as that was the interest rate OCBC offered for fixed deposits placed using CPF-OA money.

The cut-off yield for that T-bill was 3.87% p.a. which wasn't a bad outcome.

That 1 year T-bill started at the end of January 2023 and matures at the end of January 2024.

So, for that T-bill, unfortunately, I would lose 2 more months' of CPF-OA interest income for the months of January 2023 and February 2024.

Total of 14 months of CPF-OA interest income lost.

Just talking to myself about T-bills.

If you are new to eavesdropping on AK, please do not jump to the conclusion that this is all that we have to do to achieve a significant level of financial security and, ultimately, financial freedom.

For the vast majority of us, fixed income alone is not going to get us to financial freedom.

References:

1. CPF or SSB?
2. Have $10K? Invest or save?
3. Changes to portfolio (Feb 23.)

UOB and OCBC hike final dividends! Huat ah!

Good news from UOB and OCBC!

When DBS declared a special dividend, I wondered if UOB and OCBC would do the same.

Unfortunately, there is no special dividend from UOB and OCBC.

However, they did declare higher final dividends!

Source: UOB.

UOB increased their final dividend by 15c or 25%.

This isn't too shabby since it is very close to a 50% payout ratio.

We can probably expect this to be the norm in future as it isn't a special dividend and, thus, unlikely to be a one off event.

As for OCBC, they hiked their final dividend by 12c!

While it is lower than UOB's 15c hike in absolute terms, it is much higher in percentage terms.

An increase of 12c from 28c to 40c is an almost 43% hike!

I am so stunned like vegetable!

OCBC is not only one of my largest investments.

OCBC is my largest investment in equities. 

My investment in OCBC is much larger than my investment in UOB.

So, my passive income in the form of a final dividend from OCBC is going to be very much larger this year compared to last year.

This is especially when I increased the size of my investment in OCBC many times in 2H 2022.

Although my war chest was rather depleted, I was able to do this by reducing my investments in Centurion Corp. and ComfortDelgro which were both underperforming.

In my blog on Wilmar's record dividend, I said I was feeling a little giddy.

I think it just got worse.

Want evidence?

See the new photo of AK below.

Alamak!

I slapped myself hard and reminded myself that the higher dividends from our local lenders will go some way to filling shortfalls from Sabana REIT, CapitaLand China Trust and IREIT Global this year.

Still early days, to avoid possible disappointment, I am keeping expectations low with regards to full year passive income for 2023.

After all, I cannot dictate how much my investments should pay me.

I will continue to exercise prudence when it comes to expenses as, generally, this is something I have considerable control over.

However, to be honest, I am feeling more sanguine about this year's passive income now.

Whether the year would end on a high note for me as an investor for income should become clearer in another 6 months or so from now.

Till then, I just have to be patient and wait.

"Wall Street makes its money on activity. You make your money on inactivity." 

- Warren Buffett

To fellow UOB and OCBC shareholders, congratulations! Huat ah!

References:
1. Reallocation of resources.
2. DBS, OCBC and UOB.
3. DBS: Special dividend.
4. 4Q 2022 passive income.
5. Largest investments (4Q 2022.)

IREIT Global: EUR 1.28c DPU meets expectation.

Some readers might remember that I said IREIT Global was a bargain in September last year in a blog.

In that blog, I took into consideration a vacant asset in Darmstadt and how that would impact IREIT Global's distribution per unit (DPU.)

I said that we could see a reduced annualized DPU of 3.5c or 3.4c.

IREIT Global declared a half year DPU of Euro 1.28c and if we were to annualize this, we get Euro 2.56c.

Income will be distributed on 23 March and assuming an exchange rate of 1 Euro to 1.42 S$, we get a DPU of around 1.82c.

Annualizing 1.82c gives us 3.64c which is at the upper end of my estimate.

So, IREIT Global met my expectation and did not disappoint.

Assuming a unit price of 52c, a DPU of 3.64c gives us a distribution yield of 7%.

A 7% distribution yield is higher than the 6.5% to 6.7% I was expecting and it is not bad at all.

We have to remember that IREIT Global retains 10% of distributable income or else distribution yield would have been higher.

Retaining 10% of distributable income is why the REIT has a very strong balance sheet by S-REITs' standards.

Also, a 7% distribution yield from a REIT with a relatively low gearing ratio of 32% is really quite good because there is no risk of dilution through equity fund raising.

A highly geared REIT offering a 7% distribution yield might have to raise funds through a private placement or rights issue which makes that 7% a lot less attractive.

If we are looking for a relatively rewarding REIT which gives us peace of mind in the current high interest rate environment, IREIT Global is a good fit in more ways than one.

Source: IREIT Global

If you want a refresher on why I thought IREIT Global was a bargain, read this blog:

IREIT Global is a bargain.

Don't want to rehash (too much.)

Income will most probably improve as the asset in Darmstadt will be progressively filled in the coming months.

Rental escalation will continue as rents are linked to CPI which is rising due to a strong inflationary environment in Europe.

Short term pain for long term gain.

Still, my investment in IREIT Global is an important passive income generator for me as it is now an even larger investment than before.

In fact, it is larger than my investment in AIMS APAC REIT.

To all fellow IREIT Global investors, stiff upper lip and soldier on.

Recently published:
Wilmar: Record dividend! VICOM steady pom pi pi!

Reference:
Largest investments (4Q 2022.)

Wilmar Int'l: Record dividend! VICOM steady pom pi pi!

2023 started out well for my investment portfolio with Volare Group offering to buy units in one of my largest investments, Sabana REIT, for 46.5c a unit in January.

As my investment in Sabana REIT is made up mostly of units bought in December 2020 and January 2021 at around 35c a unit, the offer was good news to me.

I last blogged about this just a few days ago:

Sabana REIT: Sell at 46.5c a unit to Volare Group?

Then, earlier this month in February, DBS announced stellar results and higher dividend.

A special dividend of 50c a share was also declared and because DBS is one of my largest investments, larger, in fact, than my investment in Sabana REIT by a good measure, it was fantastic news to me.

It will have a relatively significant impact on my quarterly passive income.

That led me to wonder if OCBC and UOB might do the same as their results are expected to be relatively robust too.

See:
OCBC and UOB to follow DBS with special dividends?

Still luxuriating in the news of a rather generous special dividend from DBS, I read that Wilmar International has declared a final DPS or dividend per share of 11c.

Together with the 6c interim dividend paid earlier, total dividend is 17c per share which is a record for Wilmar International!

As one of my largest investments, Wilmar International is in the same bracket as DBS and UOB in my investment portfolio.

See:
Largest investments updated (4Q 2022.)

Good news all around!

Although I am telling myself don't let it go to my head, I am feeling a little giddy, to be quite honest.

I have to be careful because I tend to make mistakes when I am feeling high.

I know this for a fact because it has happened a few times before.

Making mistakes when I am on medication is unfortunate but making mistake when I am feeling high is shameful.

I already gave myself a little treat when DBS announced its special dividend.

I think it is OK to give myself another little treat.

Must be nicer to myself.

Wilmar International and our local lenders are all cyclical businesses and the weather isn't always going to be sunny.

I am not being a wet blanket.

It is just the hard truth.

So, socking away a big chunk of the bumper dividends in preparation for rainy days is the sensible thing to do.

I alluded to this when I shared my 2022 full year passive income at the beginning of this year.

This is not being pessimistic.

It is just being pragmatic.

See:
Passive income: More resilience.

Still, rain or shine, I expect Wilmar International and our local lenders to continue to bring home the bacon for many more years to come.

I also remind myself that I have not always been right and that I have been wrong too.

I have also said many times that as long as I am right more often than I am wrong, I should do well enough.

Peter Lynch famously said that if we can be right 6 times out of 10 when investing our money, we are not doing too badly.

However, I should also say that unlike Warren Buffett who has money pouring in constantly so that he can invest and compensate for mistakes, we don't have that luxury.

So, by socking away cash whenever we get a boost in passive income allows us to do a mini mimicry of Warren Buffett's cashflow which will allow us to compensate for mistakes more easily.

Of course, if you are someone who is able to mimic Warren Buffett's cashflow without having to do what I do, then, good on you!

If you are a new reader or cannot remember, I blogged about this in 2014:

How to make recovering from investment losses easier?

Moving on to VICOM which reported higher earnings and declared a final DPS of 3.32c, long time regular readers know that this is one of my larger smaller investments.

This means that the position is larger than $50,000 but smaller than $100,000 in market value.

Unlike its parent, ComfortDelgro, the price of VICOM's common stock is very much above my buy price since I added it to my investment portfolio in 2015.

I would say that VICOM is similar to ST Engineering, another one of my larger smaller investments, in the way that a big portion of its income is assured because of our government.

Just like ST Engineering, VICOM also pays out 90% of its earnings as dividends.

Not an exciting investment but a steady one for income, I expect it to continue paying for my car inspections (and more, of course.)

VICOM steady pom pi pi!

Very apt Singlish phrase if we were to imagine cars honking.

I think I have rambled long enough in this blog.

To all fellow Wilmar International, DBS and VICOM shareholders, congratulations and huat ah!

References:
1. Accumulating Wilmar.
2. Wilmar: Free stuff...

$460K scammed. Chen Liping & Lin Meijiaos' lesson?

I have not been watching anything on TV for many years. 

I don't even know who are the new stars in local dramas.

I only know Zoe Tay, Chew Chor Meng and people in that age group.

Alamak.

Did I just reveal my age?

Anyway, when I read that Chen Liping and Lin Meijiao got scammed, I was stunned like vegetable.

Then, I felt sad.

Really, really sad.

Why like that?

Source: Today Online.

I don't know how rich they are but how they just handed over hundreds of thousands of dollars to a friend to pass to another friend was mind boggling.

They thought it was to be used for some investment which would make them more money.

No due diligence whatsoever.

Yes, I get it that it was a friend they trusted.

I am using the past tense, yes.

So, shouldn't we trust our friends?

Oh, I am not going there.

Bu yao hai wo.

We can trust (some) friends.

However, this case is about putting our trust in a friend's friend.

We don't even know that person who is going to be "investing" the money!

Sigh.

I hope Chen Liping and Lin Meijiao remember this lesson for a long time.

I have no malice when I say this.

I really do mean well.

Like I said, I don't know how rich they are but, for most of us, it would be very depressing to lose that kind of money.

It wasn't even due to a bad investment decision.

To me, they were simply too easy going with their money.

It made them easy targets for cheats.

It was worse than being sold unsuitable products by financial advisers.

Remember this blog from 10 years ago?
Nobody cares more about our money than we do!

Indeed.

If we don't care about our money, our money won't stay around long enough to care for us.

It is not a bad thing to be a bit cynical in life.

Not too cynical.

Just a bit.

Related posts:
1. Taking candy from babies.
2. Advice from a fraudster.

Sabana REIT: Sell at 46.5c to Volare Group?

One month ago, I blogged about the offer of 46.5c a unit by Volare Group to increase their stake in Sabana REIT by another 10%.

I have looked at the offer documents yesterday and it seems that those who decide to offer some or all of their investment in Sabana REIT for sale will get 45.04c a unit instead of 46.5c.

The very first section of the offer documents explains what "you will get for your units."

"S$0.465 in cash - S$0.0146 distribution = S$0.4504."

So, it seems to me that Volare Group is using the incoming income distribution from the REIT to help fund their purchase.

Is this offer still attractive?

Well, there are many ways to look at this and if we are to only look at the numbers, netting 45.04c a unit is still pretty attractive.

We don't have to incur any brokerage fee.

Sabana REIT was trading at 42.5c a unit the last I checked.

So, we could offer to sell all or some of our investment to Volare Group and buy an equivalent number of units from Mr. Market if we wished to retain the same level of exposure to the REIT.

This is an arbitrage opportunity to make some pocket money, if we want to take advantage of it.

There is risk, however.

The offer will only succeed if 10% or more of Sabana REIT's units are tendered.

If the offer should fail, this arbitrage strategy would saddle us with more units of Sabana REIT than what we started out with.

So, think carefully.

If I were to do this, I would remind myself of a couple of points.

1. Use only money which has been earmarked for investing for income.

2. Do not buy more Sabana REIT units than what I am comfortable holding in total in case the offer fails.

Personally, I won't be doing it.

Don't I want to make some extra pocket money?

Well, it isn't going to be that significant a gain unless I take a huge gamble.

A huge gamble?

A difference of 2.5c a unit = $25 per 1000 units.

So, I would have to buy some 100,000 units from Mr. Market while tendering the same amount to Volare Group if I wished to make $2,500.

I would have to fork out $42,500 before fees.

I don't have that money in my war chest now and even if I have that money, I would not do it because I am happy with how my portfolio looks now.

If I had a smaller investment in Sabana REIT, I might do it if I had the money but I feel that my exposure to the REIT is appropriately sized.

Appropriately sized?

Mustn't just look at the size of my investment in Sabana REIT.

I remind myself that I already have a very large exposure to industrial REITs with AIMS APAC REIT being my largest investment in this space.

Anyway, this is just me talking to myself as usual.

If anyone is thinking of arbitrage, good luck.

Huat ah!

Reference:
Offer of 46.5c per unit.

Evening with AK and friends 2023. Incoming!

I absolutely did not see this coming.

I did not plan to have another "Evening with AK and friends" this year or the next either, to be honest.

Inertia is a terrible thing.

Always lazy but grown lazier.

Terrible, I know.

However, my comments section was buzzing with requests for a comeback event a couple of weeks ago and that gave me a nudge.

If you are unaware of the buzz, see comments section: HERE.

Anyway, my friend from The Fifth Person, Kenji, saw the comments and said my readers missed me and offered to organize a comeback event.

So, it seems that "Evening with AK and friends 2023" is happening soon.

AK has been out of the limelight for many years.

Only active in my blog, boycotting Facebook, means a lot less interaction online.

It has become harder for anyone to contact AK as even my email link has gone out of service.

My blog's comments section is the only line of communication left open and, even so, anonymous comments are blocked.

This means that apart from talking to myself, I only talk to regular long time readers most of the time in my blog.

This is all by design and I am happier this way.

Regular long time readers might remember that tickets to past "Evening with AK and friends" sold out within 24 hours of launch.

However, I suspect that it might take much longer for tickets to be sold out this time as I don't think AK is as popular as before.

So many new local bloggers and also YouTubers popped up in the last few years in the personal finance and investment space.

A number of social media influencers shared their sexy ways to get rich quick or to 10x our money too.

Not surprisingly, they attract many followers.

AK is out of fashion which is true in more ways than one. 

To be honest, this is fine by me.

Still, some fellow bloggers might question why I would give up years of progress made as a blogger and retreat to my little corner in cyberspace?

The answer is simple.

AK is a hobbyist blogger.

Blogging is a hobby.

If I were blogging to make a living, then, I would have done things differently in the last few years.

If blogging became a business or a career, however, I am sure I would not like it as much.

Anyway, this is just a heads up that "Evening with AK and friends 2023" is happening.

There will either be 150 or 300 tickets available, depending on how lucky we are with the venue.

For sure, the event will be happening before the middle of the year.

Time is going to be 7pm to 10pm like before.

More details will be available very soon.

So, look out for it.

It is all about pASSIve income!

It has been almost 5 years but we are back!

I have always wanted to say something like this.

So drama. :)

Reference:
Financial freedom and a long break from public appearances. (Give me F.I.R.E.)

Recently published:
Changes to portfolio in Feb 2023.

Changes to portfolio in February 2023 (so far.)

In February, I bought T-bills again although in smaller sums compared to January.

I had thought I would not be buying any T-bills in the month of February. 

Why?

I blame the fixed deposit promotions from DBS and OCBC.

Their promotional interest rates of 3.9% p.a. and 4.08% p.a. drained whatever excess cash I had.

Alamak!

All money locked up?

How like that?

Readers who have been following my blogs for many years would have an inkling that AK would never allow something like that to happen.

It was mostly money which was locked up before getting locked up again but with higher returns.

People cannot say cash is trash anymore.

Even Ray Dalio says that cash is no longer trash and, on hindsight, it was better to hold cash than many assets in 2022.

After placing those fixed deposits with DBS and OCBC in February, what cash I had left was mostly in my float which I didn't want to lock up.

That meant no T-bills.

However, I found some money at home and in excess of $10K too.

I thought of putting that money which was playing truant at home to work in a CIMB fixed deposit.

Why CIMB?

CIMB only required a minimum sum of $10K for their promotional interest rate of 4.2% per annum for a 12 months or 18 months tenor.

Unfortunately, that promotion ended in January and they only offered 3.5% p.a. in February.

$10K was too small a sum for DBS or OCBC as they required a minimum sum of $20K.

Who said building wealth was easy?

New YouTube video on wealth building by AK Production House here:

So, I split the money in half and put in non-competitive bids for the two auctions happening in February for 6 months T-bills instead. 

T-bills only require a minimum sum of $1K, after all.

Why split the money in half and not get all the T-bills in a single auction?

Well?

I didn't know what the yields would be like.

So, it was a simple case of not putting all the eggs in one basket.

I know the amount of money involved this time was relatively small but it was still a good practice.

I am also willing to do it because the application process was very easy using the DBS phone app.

The two 6 months T-bills auctions gave me cut-off yields of 3.88% p.a. and 3.93% p.a. in the month of February.

When I blogged about this plan at the start of the month, I said that I would be quite happy to get a yield of 3.9% p.a.

So, mission accomplished.

Yes, I keep reminding myself that socking away money isn't a bad thing especially when it has become a lot more rewarding to do so in recent months.

This goes in tandem with keeping our needs simple and our wants few.

This was brought up in another new video by AK Production House here:

In equities, I decided to let go of my investment in SATS in early February when, inexplicably, the stock price went higher.

Inexplicably?

Well, at least to me, it was inexplicable.

There is no accounting for Mr. Market's mood swings, I always say.

I really didn't want to have to bother with the proposed rights issue especially when I used my SRS money to invest in SATS.

This was many years ago but long time regular readers might remember my blogs on SRS money and how I would use them to generate higher returns.

If you are new to my blog or need a refresher, I shared a screenshot of my SRS investment portfolio in 2017:

Win and win again with SRS.

I was careful to invest my SRS money only in endowment policies and businesses which I thought would never have to do equity fund raising by issuing rights.

Anyway, I bought into SATS donkey years ago at about $2.90 a share and I have received many years of dividends.

This matter of acquisition and fund raising has been going on for so long and I am glad to be rid of it.

I actually produced a short video on this in October last year and, obviously, I wasn't too pleased even back then.

Watch video here:

Given the rather large impending rights issue, I was really lucky to be able to book a capital gain upon disposal too.

At least, I feel lucky now.

Hard to say if I would have seller's remorse later as, to be honest, the acquisition could turn out well.

Alamak! 

I shouldn't dwell on that or I might go crazy (again.)

The money raised from the sale could be used for 6 months T-bills in March.

Yields on short term treasuries in the U.S.A. have been elevated and, if this persists, we could see higher yields for T-bills in Singapore too, everything else being equal.

I don't think there will be any changes to my investment portfolio for the rest of February.

Now, I need to think about March.

References:
1. How to use SRS money?
2. Have $10K? Invest or save?
3. No T-bills in February?
4. Emergency fund and float.

Emergency fund, float & convenience cash. Buffers.

I blog about emergency fund from time to time. 

I have mentioned having a float at times too but not as often as my talks to myself on emergency fund because I didn't think it was as important.

Why?

Well, know it or not, all of us have a float.

Just like an emergency fund, it just varies in size for each of us.

Not everyone has an emergency fund and I suspect most don't have one or an adequate one.

However, I suspect that, unless extremely financially constrained, all of us have a float.

Now, I am not using the word "float" very strictly like a finance professional would.

In finance terms, a "float" is money that appears in two accounts at the same time as the money is being transferred from one account to another.

What I refer to as my float has a similar flavor but with a larger temporal window.

My float is money which I have on hand which is farther away than "convenience cash" which is money I keep at home and, therefore, nearest to me. 

However, money in my float is nearer than money in fixed deposits.

Yes, it is money in my savings and current accounts.

My float is really a form of convenience cash but just not as convenient.

Although not as large a sum as my emergency fund, the float is still around $100K at any one time.

The float exists so that I have ready funds to make routine monthly and quarterly online payments or whenever they are required. 

The float also exists to honor monthly and yearly GIRO payments which I have in place.

So, the money in my float is money which has been earmarked for various payments to be made in the future.

Yes, the float is to fund consumption.

Admittedly, my float could be smaller as I am not excessive by most standards when it comes to consumption. 

However, I was serious when I said I was mental on multiple occasions.

Buffers allow me to sleep better at night.

Having a larger float gives me another buffer.

What this also means is that in case of an urgent need for a relatively large sum of money in my family, I have money which can be deployed immediately.

However, my float alone isn't sufficient as an emergency fund which must be able to cover many months (and in my case, it is 24 months) of expenses for my whole family in case our cash flow goes negative.

Anyway, to be used in an emergency is not the primary purpose of my float but it could be used to plug sudden one off financial gaps.

My float is really wearing many hats.

So, the term "float" is pretty apt as the money can go wherever it is needed especially when it has a comfortable buffer.

Why am I blogging about this if I thought it wasn't important before?

I was thinking about random stuff and quite suddenly felt like doing it. 

I just thought "why not?"

If anyone should ask me what I meant by having a "float" in future, I would have a blog to point them to.

I hope I am right when I assume most people have a float just like me and that I am not being more mental than usual.

Do you have a float, oppa AK style?

References:
1. Emergency fund.
2. Convenience cash.

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!