Wednesday, 20 January 2016

Is M1 oversold? Is the sky falling?

The market is ruled by emotions and sentiments nowadays. Nobody reads and analyse financial reports. Fundamental analysis? Nah! Who has time for that mumbo jumbo! We prefer to let emotions rule our heads instead of basing our investment decisions on actual hard figures.

A cursory glance at some local investment forums and you would see hysterical comments like "Oh no! I was vested in M1 at XXX price. Should I cut loss?" >____<

I have provided some points on why the fear of the 4th telco is blown out of proportions in one of my previous posts. For those newbie investors who are facing a dilemma in choosing between cutting loss, averaging down or holding, I shall do the 'homework' for u.

Present scenario
-Annual earnings: 19 cents
-Annual dividend: 15.3 cents
-Dividend payout ratio: 80%
-Yield: 6.4%

Expected scenario (10% drop in earnings after the 4th Telco has commenced operations for a few years)
-Annual earnings: 17.1 cents
-Annual dividend: 13.7 cents
-Dividend payout ratio: 80%
*Assuming investors want a 6% yield at least, the price will be $2.28

See. Not so difficult right?
Now, armed with this information, you can make a more educated decision.


Everyone hates homework
DK

Tuesday, 19 January 2016

Is the world prepared for the next crisis?

In all the past global economic recessions, central banks would usually step in and stimulate/ prop up the economy with loose monetary policies. Governments would also implement certain fiscal policies and even extreme measures (bailout) to help businesses to survive a sharp downturn.

Ben Bernanke cut interest rates from more than 5% to 0% in the previous crisis and kept it that way over 7 years. The world also enjoyed 3 rounds of QE. Seeing the effectiveness of these 2 measures, major central banks in Europe and Asia follow suit. Everyone kept interest rates low and carried out their versions of QE since 2008. 

Unfortunately, since interest rates are already low, Janet Yellen has very little left to manoeuvre. The best she can do is to either postpone further hikes or maybe even cut it back down to 0%. Worst still, QE3 showed us that printing huge amounts of money loses its effectiveness the more times you do it. So, QE4 or QE5 would arguably harm the economy more than help it. As a result, central banks around the world have no more weapons left in their arsenal to fight a global recession.

But the all-powerful governments can surely save the day, I hear you say. Not really. Many governments have huge debts on their balance sheets. Some of their budget deficits are mind-boggling huge! They are already struggling to stay solvent (looking at you Greece!).  Many developed countries have their credit rating cut. Even USA had its 'AAA' rating cut in 2011! >___<

In conclusion, I think the world ill-equipped to handle the next crisis in a swift and effective manner. On the personal front, I hope everyone has been saving up that 'rainy day fund' because we might need it soon.


Always be prepared
DK

Thursday, 14 January 2016

Dividend Knight Portfolio Update (Jan 2016)


 
Company
Shares (1000)
1.
M1
12
2.
AIMS AMP
30
3.
Starhub
10
4.
Singtel
8
5.
Frasers Centrepoint Trust
12
6.
CACHE Logistics Trust
20
7.
Mapletree Logistics Group
18
8.
SATS
4
9.
CapitaLand Mall Trust
7
10.
Raffles Medical Group
3
11.
ST Engineering
3
12.
ParkwayLife REIT
5
13.
Suntec REIT
6
14.
MGCCT
7
15.
Keppel DC REIT
10
16.
Sheng Siong
7
17.
OCBC
0.4
18.
Mapletree Commercial Trust
2
19.
VICOM
0.5

Dividends received in January 2016: S$544

Total dividends received since Jan 2016: S$544

Average dividends per month: S$45.33

Average dividends per day: S$1.49


For the month of January, I only received $544 in dividends from Singtel. Due to the recent stock market carnage originating from China, I finally had the opportunity to add OCBC to my portfolio. My next target shall be DBS. If you remember, I did mention in my previous post that 2016 will be my 'bank-nibbling' year. OCBC did a commendable job of consolidating Wing Hang Bank which it acquired in 2014. Moving forward, I hope the acquisition will help to boost earnings. Furthermore, OCBC has a generous SCRIP dividend programme whereby shareholders have the option to receive their dividends in the form of shares at a 10% discount to the prevailing market price. Lastly, I am confident that OCBC has the ability to at least maintain its dividend payout this year, resulting in a dividend yield of around 4.3%. In my opinion, this is the sweet spot between growth and yield.

Telcos and REITs are surprisingly resilient in the face of such disastrous and volatile market movements. Sure, their prices did drop like the rest, but not as drastic. I guess some investors are fleeing to safety, which means falling back on the 'never-out-of-favour' income stocks. Fortunately, telcos and REITs are already the 'bread and butter' of my portfolio. Secondly, investors are starting to realise that certain industries are relatively insulated from the China crisis and oil price rout. I don't think you will hear someone say "Oh no! China stocks are crashing! I must cancel my mobile plan now!"


NOT having sleepless nights
Dividend Knight