Passive Income From REIT? - Part 2

Passive Income From REIT?

How can REIT share be evaluated?

REIT share valuation is based on a number of relatively transparent factors:

Net Asset Value Calculation

REITs as well as REIT analysts perform regular (annual, and often quarterly) valuations of their company property holdings.

The value of a REIT’s total assets, minus liabilities, divided by the number of its shares outstanding results in what is called the Net Asset Value (NAV) per share of the company.

Thus, the value of a REIT’s shares is to a significant degree based on the value of its tangible real estate holdings.

Property Portfolio Enhancements

The value of a REIT’s property portfolio can frequently be either maintained or enhanced through consistent capital expenditures. This is significant because strategic property portfolio enhancements help to maintain or
increase NAVs and provide the basis for price appreciation of a REIT’s shares.

Why some REITs have low or zero gearing?

Either they are still in their infancy stage of growth or has slow down their growth or has reduced their debts exposure by disposing assets or raise equities.

Gearing

Leverages are double-edge sword - can boomz and can also doomz so there is no clear cut right or wrong.

Passive Income From REIT?

Heard some active discussions on REIT at Bullythebear's cbox and my mouth also becomes itchy and need to

From Wikipedia

What is REIT? 

A Real Estate Investment Trust or REIT is a tax designation for a corporation investing in real estate that reduces or eliminates corporate income taxes.

In Singapore, it is commonly referred to as S-REITs. There are currently 20 REITs listed on the SGX, starting with CapitaMall Trust [6] in July 2002. They represent a range of property sectors including retail, office, industrial, hospitality and residential. S-REITs hold a variety of properties in countries including Japan, China, Indonesia and Hong Kong, in addition to local properties.[citation needed]

S-REITs are regulated as Collective Investment Schemes under the Monetary Authority of Singapore's Code on Collective Investment Schemes or alternatively as Business Trusts.

S-REITs benefit from tax advantaged status
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Is using high dividend yield REIT as passive income sounds very good?

Do you hate borrowing, right issues or private placement?

If yes, then avoid REIT, it is not for you. Why?

REIT simply distributes all or almost all of its profits and gets to skip the taxation and seldom attempts to pay off its debts and depends on borrowing, refinancing and even raise funds to survive.

How does REIT survive in bad times?

It depends on its ability to refinance or raise fund from the capital market. Ability to raise fund that counts.

How does REIT grow?

Since REIT already pays out most of its earning as dividends; it is very hard to grow from retained earning or internal funding.

It has to borrow or raise funds from the capital market to grow.

Is Low Gearing REIT safer?

Not really sure leh?

Less borrowing or low gearing just means that the REIT has currently slowed down its growth potential and become more concerns over survival. It doesn't necessary means that it is safer than a higher gearing REIT.

It is the ability to refinance short-term maturing debts or raise funds from the capital market that determines its level of safety in the market.

Lower debts don't mean that creditors are not going after their blood if things get nasty.
 
When the REIT has less confidence in its ability to refinance short-term maturing debts or raise funds; it is more likely to reduce its gearing to increase its chance for survival.

All investments by nature are risky and just don't get too excited over its high dividend yield and become over-exposed to this sector.

My 2010 Passive Income From Stock Dividends

Finding Both Dividend & Growth Stock?

Can Blue Chips Be Dividend Yield Play Stocks?

1. Kep Corp (2001): 8.1% ROC. Full Year is likely to be 13.4% (exclude free KGT at 8.1% ROC)

2. Semb Corp (2002) : Full Year is likely to be 10.5%

3. DBS (2003) : Quarterly 1.8% ROC. Full Year is likely to be 7.2%

4. CIT -Cambridge (2008) : Quarterly 2.6% ROC. Full Year is likely to be 10.4%

5. Noble (2008) :  Full Year is around 5.5%

My plan is hold these five stocks for long term passive income.

Dividend Stocks Can Pay Off For Recent Retirees

By: Jennifer Woods,

Having an allocation to dividend-yielding stocks can be a good move for most investors, but for those who are in or nearing retirement, it’s a must.

Christopher Davis, senior mutual fund analyst with Morningstar, says many newly-minted or soon-to-be retirees are primarily in fixed income investment, and, as a result, risk prematurely running out of money.

“A lot of times people associate retirement with fixed-income investing," says Davis. "They need to be safer since they’re living on that money and need the income which fixed income provides. If you are just starting retirement, you have potentially 20 or 30 more years of life left and you need to be able to continue to grow your nest egg and protect it against inflation.”

Dividend-paying stocks, he says, offer components essential to anyone in this demographic, including a solid income stream, growth potential (for offsetting inflation) and less-than-average volatility for a stock.

Dexter, president, chief investment and chief executive officer of RNC Genter Capital Management, says a substantial allocation to stocks is key and the lion’s share of should be in dividend paying stocks.

“It is necessary just to provide enough income,” he says, adding that bond yields are so low right now—ten-year Treasurys are yielding less than 4 percent—you need to make it up on the equity side, which means having that position in high dividend-yielding stocks.”

"They still feel that bonds are for income and stocks are for growth," explains Genter. "While that may have had some merit in the past when stocks were growing at 20-25 percent. In the current environment, many people would be happy having 10 percent total return and a 4-5 percent.

Tom Huber, manager of T. Rowe Price Dividend Growth Fund, says it’s important that a stock have a good current yield and the the opportunity for good dividend growth over time.

“I look for companies that may not be yielding 4-5 percent or even 6 percent, but have good dividend growth opportunities going forward,” says Huber.

Huber says consumer staples are a good example because the group “is a traditional area for healthy dividends and good dividend growth ... a lot has to do with the stability of those business and their ability to turn out healthy profits in good and bad environments."

One thing Huber cautions investors to be aware of when selecting companies for their dividend allocation is whether the company will be able to maintain the dividend.

“Often when you see a very high yield, you may want to question the sustainability of the dividend,” says Huber. “Take another step in addition to looking at the yield. Look under the covers."

High Dividend Yield Stocks?

"I want to build wealth slowly by investing in high dividend yield stocks" said many bloggers.

The statement is true only it is a high dividend stock for you; but for other potential or new buyers it is not a high dividend yield stock, then you are on your way to build your wealth slowly.

It is in fact quite risky to hold a high dividend yield stock after one year if the stock still remain a high dividend stock with low liquidity.

The truth is that most investors love high dividend yield stocks and most investors love to build their wealth slowly. So far I haven't met someone who tells me that he/she is not keen on a high dividend yield stock and doesn't want to own it for long term.

If it is so good to be true, why are there not many investors willing to step up their bids to buy more and over time the stock price will slowly move higher. Think about it.

2010 Passive Income From Stock Dividends

1. Kep Corp (2001): 8.1% ROC. Full Year is likely to be 13.4% (exclude free KGT shares at 8.1% ROC)

2. DBS (2003) : Quarterly 1.8% ROC. Full Year is likely to be 7.2%

3. CIT -Cambridge (2008) : Quarterly 2.6% ROC. Full Year is likely to be 10.4%

Waiting for more to come ...