As from April 2013 my Journey in Investing is to create Retirement Income for Life till 80 years old for two over market cycles of Bull and Bear.

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Monday, 31 July 2017

Yield Comparison???


Walau! Can like that compare meh!

Comparing dividend yield among stocks and S-REITs is dumb without comparing dividend yield and dividend payout ratio as a PAIR!

5 comments:

  1. 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!!!!

    Now 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"??

    ReplyDelete
  2. Rights issue is not necessary the real problems.

    After all any company may call for one too.

    The real problem is any rights issue is for what?

    Debt repayment or company expansion to generate more profit for higher div.

    Actually even for debt repayment is O. K. if the gearing ratio goes down and the dividends goes up. (Aka pay less interest on debt more money for DPU?)

    How about the recent FLIT "expansions" through private placements.

    Are current holders better off or worse?

    It seems we are slightly worse off due to dilution of share holdings.

    DPU going down?

    Vested.

    ReplyDelete
    Replies
    1. 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.

      However 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.

      Delete
    2. During 2008/2009 fiasco, i had quite a lot of reits.

      But they are "AH KONG" related.

      Even then i hesitated to subscribed but i did.

      i even subscribed for excess.

      Crazy or not i don't know.

      If i did not dare to subscribed, i lost big time.

      Might not had taken up rights issue if not sure of "pedigree".

      DBS had rights issues too.

      This one i chickened out.

      i subscribed for half entitlement only.

      Just imagine all the biggest banks in US kaputed, what about our banks.

      In fact, some people think the most dangerous to buy at this time is financial companies.

      i think there are managed funds in US that don't invest in Financial companies at all at all time.

      Of course many Singaporeans think our Local Banks are better managed or capital back-up.

      Delete
    3. At least for Ah Kong-related or sponsored entities ... Ah Kong won't just let them collapse.

      If 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!!!!

      Delete

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