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A Systematic Approach: How Dimensional’s Global Targeted Value Selects
Stocks
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The Dimensional Global Targeted Value is one of the funds that are
available for investment if you have an adviser that can recommend
Dimensional funds. ...
1 hour ago
Not too long ago insurance salesman could go around saying Ehhh, this 5-yr endowment very good ... 3.8%p.a. .... capital guaranteed!! .... Better than the bank!!! Hohoho!!!!
ReplyDeleteNow people say Ehhh, this REIT very good .... give 8% DPU!!! .... Better than DBS or OCBC stock!!! Kekekekeke!!!
Did they also mention that chances of REIT shareholders getting slapped with rights issues left, right, centre are almost sure thing during recessions when credit facilities suddenly becomes tight, bond yields spike, and REITs start using shareholders as "banks"??
You're right ... Rights issue can be good if it's for yield accretive purposes i.e. at end of day contributes to higher DPU.
ReplyDeleteHowever it can be dilutive if it doesn't lead to increasing income. E.g. merely to pay off existing debts is usually dilutive coz the increase in shares is often higher than the interest savings.
During recessions when banks are more stingy & rentals go down & vacancy rates go up, very high chance for REITs to do rights issues just to clear their debts to banks and/or bondholders. If long recession, there will be multiple rights issues.
Unlike "normal" companies, REITs don't have much cash buffer as 90+% earnings are distributed. Hence during bad times with cash crunch, they have no option but to do rights issues, as borrowing from banks or issuing bonds will require paying high interest rates.
During 2008/2009 even though the FED & other central banks "saved" the world through QE and resulted in a VERY short & MILD recession for S'pore, many local REITs still had to do big rights issues to raise money quickly. And many retail investors were KPKB-ing even though just 1 or at most 2 rights issues. Imagine a long-drawn recession and 5-10 rights issues AND DPU still going down by -20%, -30%...
Of course during non-recession times, things are usually OK. Only a bad manager or really arse luck (e.g. retail property REITs in US) will cause things to go bad in good times.
At least for Ah Kong-related or sponsored entities ... Ah Kong won't just let them collapse.
ReplyDeleteIf collapse, then S'pore probably already gone case liao ... and we will have bigger problems than investments or even retirement funds.
But that doesn't mean Ah Kong don't expect you to pay when times are tough ... Pay And Pay!!! Kekekeke!!!
Yeah ... our Sinkie banks are usually better capitalized than those big MNC investment banks and less exotic "financialisation" ... But also means our banks not so profitable during good times.
I think the next big risk is all those trillions in junk and not-so-junk corporate debts in both US & China. Combined with the Great Unwind of QE and risk of bond yield increase .... will be explosive combination. Hohohoho!!!!