3rd Qtr 2021 : Portfolio & Dividend Update

 “The big money is not in the buying or selling, but in the waiting.”  - Charlie Munger

 

“The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett

 

“Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t pay it.”  Albert Einstein

 

“If you do the math, and think about it in any long-term way, the people who do well, are the people who compound over and over again. Compound every year. Don’t try and get rich quick. Try to get a decent return and keep doing it.” - Tom Steyer

 

"The effects of compounding even moderate returns over many years are compelling, if not downright mind-boggling." - Seth Klarman

 

"A mere 3% annualised edge will produce a 2.4-fold advantage over a 30 year period - the salient lesson that compounding teaches - the power of a long runway." - Allan Mecham

 

“Remember the power of compounding. You don’t need to stretch for returns to grow your capital over the course of your life.” -  Walter Schloss


The secret to Warren Buffett's wealth creation <source:MorningStar.com>

 

“Look at that closely.

In 2008 see the net worth plummet. Buffet's portfolio declined from $62 billion to $37 billion. That is a 40% plummet during the subprime crisis!

The message here is - when the stock market corrects, even the best investors' portfolios follow suit.

It is the long tenure that capitalizes on the magic of compounding to pay handsome returns. Do good returns matter? Of course, they do. But to create wealth, it is compounding that banks on longevity.”



                                                                                            Figure 1"Image credit : Morningstar.com”


"Compounding is one of my favourite words. Compounding is powerful. Warren Buffett did not become one of the wealthiest men in the world by suddenly striking gold in a single highly successful investment, but rather by compounding the value of Berkshire Hathaway at a 20 per cent or so rate for 45 years. If an investor can achieve an average annual return of 20 per cent, then, after 45 years, an initial investment of $1 million will appreciate to $3.6 billion. Wow!"  -  Ed Wachenheim


Dow 32,000? If dividends counted, the index could be more than 1 million points higher <source: Marketwatch.com>

The Dow Jones Industrial Average should be trading not near 32,000 but actually above 1.2 million.

I am not making some wildly bullish prediction about the stock market in coming years. I am instead reporting where the Dow DJIA would be trading now if it had incorporated dividends that component companies have paid over the years, as well as other corporate actions that affect stock prices, such as stock dividends and rights issues.

 

New research from the National Bureau of Economic Research calculates that had all such events been taken into account since Oct. 31, 1928, the Dow would have closed at 1,113,047 on Dec 31, 2019. The Dow’s gain over the subsequent 15 months would propel its “true” value currently to more than 1.2 million.

 

The study’s authors are John Shoven and Clemens Sialm, finance professors at Stanford University and the University of Texas at Austin, respectively, along with Jacky Lin and Genevieve Selden. The researchers tell a sordid tale of the Dow’s construction over the decades 

"It's hard to believe that over the last 100 years the S&P 500 rose 273-fold, but adjusted for dividends it rose 18,520-fold." Morgan Housel

 

 

The Power of Dividends < source: Hartfordfunds.com>

 

The Long-Term View Dividends have played a significant role in the return investors have received during the past 50 years. Going back to 1970, 84% of the total return of the S&P 500 Index1 can be attributed to reinvested dividends and the power of compounding, as illustrated in FIGURE 1. 




STE 3rd Qtr Portfolio & Dividend Update :




Time flies, we are almost at the end of 3rd Qtr and the market continues to be volatile with STI moving within a range-bound between 3000 to 3200.

From all the above quotes and studies, we notice a very important key factor in successful investing is to understand the impact of “long term compounding effect “over a long period of time.

From various studies and sources, it seems that dividends attributed almost 50-70%  in total market returns, depending on how we slice and dice the data and the time period of studies. It is an “undeniable fact” that dividend (re-investing) contributes greatly to our investment return in the long run.

 

A Malay proverb said : "Sedikit-sedikit lama-lama jadi bukit." In literal translation, it means "Bit by bit, over time, it will accumulate into a mountain.


<Imgae credit: seekingalpha.com>



Over the past 10 years, with exceptionally great “bull” for tech and growth stocks which normally don’t pay any dividend, some investors may start to doubt the importance of “dividend “in stock investing. Of course, here I am not saying that all the “non-dividend “paying stocks are not good, those with strong “cash flow “and doing the “share-buyback “ like BRK/Apples etc. are still a good company to invest as in the US, sometimes share buyback is preferable due to tax issues.

Although I have started to invest in non-dividend paying tech stocks but as a “die-hard “dividend (since I bought my first stock of Magnum BHD ) and income investor, my portfolio still very much lean towards income/ dividend play. When I started investing in Malaysia KLSE, I invested mostly in dividend-paying stocks like Perlis Plantation/ BJ Toto/ Malakoff / PB Bank / Guinness Anchor BHD (before bought over by Heineken)/ Oriental Holdings etc.

 

You may notice that I will attach the above chart every time I have my quarterly update, the intention is not to “show-off” how much or the total amount I have collected but rather to show the “compounding effect” of dividend collected from a very small amount of just a few hundred dollars in a quarter to $35-50K a quarter if we continuously and consistently save and invest in good fundamental and dividend-paying stocks over a long period of time.

Over the period of 23 years, Dividends play a very important role in my total investment return.

Today, I am happy to inform you that this is another “milestone “for me, as my total dividend & interest income collected from my investment had exceeded the $2 mil mark ( $ 2,052,470.59 ).

Total from dividend = $ 1,993,041.18

Total interest from (Bond) = $ 59,429.41

 

$2 mil may not be a huge amount in today’s dollars as everything is so expensive (with inflation ) and a condos price for “OCR -outside central region” like in Pasir Ris are selling at @2k /psf nowadays! So the $2 mil may not be enough to buy a decent condo at OCR area, but it's OK, I am happy staying in HDB and taking public transport. :D

For a person who is not “born with a silver spoon” and came from a poor family (kampong) background, I am happy and contented with such achievement. Start from scratch, save and invest ( live within your means to avoid lifestyle inflation), worked part-time to earn extra income, invest and learn from mistakes, read extensively without taking any expensive investment courses.  I still remembered that those days without the internet world like now, we have to just rely on information from newspaper and I have to go to my neighbour’s house ( a grocery & convenience shop) to borrow paper and read.

 

Good Financial Journalist That Could Shape Your View in Investing

October 05, 2016

 

After graduated and start working, I continue to read a lot and start to have my own collection of books on various topics from investment psychology/ accounting / behavioural finance to investment philosophies etc.

 

My Book List & Blog List

August 05, 2016

 

Even with extensive reading, we will continue to make mistakes from time to time, learning will never end and I am sure I will still make mistakes and collect more “lemons” in future. But as long as we have more winners than losers, I think we should be fine. I will talk about the “hit-rate” later in below with my experience and example.

 

How Many “Lemons” Do You Have In Your Portfolio?

May 08, 2019

 


Portfolio & Dividend Update 3rd Qtr 2021 :





Total Dividend &Interest Income for 3rd Qtr 2021 : $ 57,535.50

Total Dividend & Interest Income Received YTD 2021 : $ 135,030.40

 

Most of the dividends came from SGX ( 53.8%) mostly from banks and REITs where dividend pay-out has been partially restored. You may see from the chart that there was a “dip” in 2020 on dividends received as most of the company either cut or suspend the dividend pay-out due to Covid-19 pandemic.

BHP’s dividend pay-out was a surprise for me as it increased the pay-out by almost 100% in this quarter in view of good profit from better commodity price, especially iron ore. (but the price had gone down by almost -54% as compared to the highest price achieved in May 2021, so may not be able to have such high pay-out in coming quarters).

Dividends receive for next quarter will be much lesser due to the divestment of some REITs and all of my Malaysia stocks and increase of Tech stocks that don’t pay dividends.

BHP is one of the “double-digit” yields on cost (16.1%) stock I have together with Lung Kee (16.2%) and Oriental Watch ( 15.6%) base on TTM dividend pay-out.




I decided to take profit on some of the REITs I have and reduced the % by around -4.8% from 19.5% in last Qtr to 14.7% with total profit of around $84K (include dividend). I have increased exposure to Tech (+6.2%) and slightly on Conglomerate/utilities and Transportation& Log following the divesting of MY stocks and REITs and keeping the balance as “war-chest”.




Have added just two stocks since the last update i.e. ( Cosco Shipping Int’l -0517 ) not the parent company Cosco Shipping Holdings -1919 where the stock price has exploded since last year. Business for 0517 is more on providing shipping services like ship agency/insurance and marine part supply to its parent company. It also has JV business with Japan -Kansai Paint on production & sales of marine/container coating. This is a net-cash company with a stable & predictable revenue and quite a decent dividend play.

Also added Ping-An Insurance which I think no need much introduction on this company.




This is the first time my HKEX stocks value had exceeded SGX in my portfolio. After liquidating all my Malaysia stocks (with more than $24K profit) , I diverted more funds to the HK market especially the tech sector, as you can see from above now I have more than 13.2% of my portfolio is in the Tech sector.

The tech sector continues to be volatile and as I mentioned earlier, the situation may not improve soon, and we should not expect a quick recovery. The crackdown may continue for quite some time and we may see another “blow “to the share price when the government announce the “tax restructuring “ ( which I suspect there is a high possibility that this will happen) as part of strategy to promote ”common prosperity “.

 

                                         Top 30 Holdings:



                                       31-53 Holdings

 



Dividend vs Capital Gain?





I have worked out the table on sector-wise returns for my portfolio. It has been widely confirmed that base on earlier articles and studies, dividends returns accounted for almost 40-70% of total market returns, depending on the time frame of data being used.

My result is a bit skewed and distorted as my early investment in the SG market was more than 95% in REITs right after Global Financial Crisis in 2008/09. That has given me a much higher dividend yield (mostly double-digit) of investment for more than 6-7 years before I started to diversify into some other SG blue chips/banks.

But since I am investing during GFC, by right the capital gain should also be higher. I think that partly because of huge capital lost on two major hospitality REITs ( EHT and ARA HT ) I have to cut lost right after the Covid-19 pandemic. Without these two majors lost (more than -$292K), the ratio for Capital gain would increase to around 34% with the remaining 66% from Dividend gain.

From above, it also clearly shows that I would be much better off if I just stick to REITs and Banks. The overall performance would be better if I just stick to these two sectors without diversifying into others like Telco and other small-cap companies e.g., Design Studio/ Sarine Tech/ TTJ Holdings/Duty-Free Intl etc.  and of course, some others poor performance of STI components like Keppel Corp/SembCorp Ind/ SembCorp Marine/M1.

Moving forward, my SG stocks are mainly in REITs / Banks and few blue chips like Keppel Corp/SembCorp Ind, no more mid or small-cap stocks. But if an opportunity arises, I may pick up some previously own good fundamental stocks again like UMS/ YZJ /Fu Yu or Valuetronic.

 

Owning Singapore stocks has been a poor bet even for investors with long horizons

“So, what is a suitable holding period for stocks?


Some might say three years is sufficient. More conservative advisers might suggest five years. But 

almost nobody would argue that 10 years is not enough time to derive the full benefit of a diversified 

stock portfolio.


Yet, investors who invested in a portfolio of stocks that mirrored the benchmark Straits Times Index

 (STI) a decade ago would probably be feeling less than satisfied right now.


During the 10-year period to Aug 20, the STI has climbed just 13.5 per cent. On a dividend reinvested 

basis, this widely referenced local market benchmark delivered a total return of 60.3 per cent over the

past decade.

 

This return pales in comparison to major market indices around the world.

 

The S&P 500 index is up 295.3 per cent during the same 10-year period. With dividends reinvested,

 it has returned 383.8 per cent.


The Nasdaq 100 is up 640.5 per cent over the past decade, and it has returned 729.9 per cent with 

dividends reinvested.


The more globally diversified FTSE All-World index is up 148.9 per cent over the last 10 years. It 

delivered a total  return of 220.2 per cent.


The MSCI Europe index, which has no exposure to the tech-heavy US market, is up 100.4 per cent 

over the past decade, and delivered a total return of 179.6 per cent.”

  

Of course, as mentioned not all stocks in STI Index is not good, just look at Banks like DBS and some

REITs like Mapletree Commercial REIT/ Mapletree Ind / ParkWay Life REIT / Ascendas Ind REIT etc.

 

DBS - the largest of the STI's components, with a more than 18 per cent weighting-has generated a 

quite respectable return. The stock is up 123.2 per cent over the last 10 years. With dividends 

reinvested, it returned 230.4 per cent.

 The FTSE ST Reit index rose 40.3 per cent over the last years and delivered a total return of 152 

per cent with dividends reinvested.”

 

 Well, giving me the choice again, I will still prefer to have a more diversified portfolio rather than just concentrate on two sectors of Bank and REITs. I am not so sure if banks and REITs will continue to perform well in future but having different sectors in our portfolio with a more diversified income sources like commodities / utilities / Transportation & Logistics etc. which move in different economic cycles may cushion some of the impact when we have problems with banks and REITs.


 What Is Your “Hit-Rate “?

 

How Many “Lemons” Do You Have In Your Portfolio?

May 08, 2019

 

 Investing in the financial markets is a way to build wealth over time. But it's not unusual to lose money in the short term from time to time, due to “greedy “or some other reasons, we tend to fall into a “value trap” company. I think nobody can say that he never loses money in stock investing, so the next time you beat yourself up over a bad stock pick, take some comfort by knowing that you’re not alone, even the world’s most successful investors, including Warren Buffett, have blundered occasionally.

For me, having a diversified (Kia-shi) portfolio is important as I know I will make lots of mistakes from time to time.

Over the last 23 years, I have invested in a total of 178 companies, of course, some win some lose, with a  hit-rate of just 67%. I know I will need to improve the “hit-rate” and avoid making “big-mistake” like the two hospitality REITs I have invested 😢.

Since some of the RED (loss) counters are still active in my portfolio, like Tencent/Alibaba/Ping-An/Baidu/Keppel Corp/SembCorp Ind /CNOOC/RD-Shell/BP, I hope some of them may change to green eventually. :D Wish me good luck, Hahaha!






少输

 

 

World Stock Market Regression Line

 

My Portfolio YTD return = 12.51% vs 17.95% in last Qtr. update (down by -5.44%) due to poor performance from HKG and Tech stocks, also the same time SG market is down by -3.2% vs last Qtr., so my performance is actually worse than STI for Qtr. 3.

But overall YTD, I still out-perform STI by 4.52%




·        STI Index down by -3.66% vs last Qtr. and still moving below the trend line of 3365.

·        I decided to take profit on few counters as to divert more funds to HKG and keeping some as a "war chest".

·        Sold Jardine C&C/ YZJ / Capital Land and Valuetronic.

·        These are still fundamentally solid companies, and I may re-visit some of this counter if opportunities arise.



·        FT ST REIT index is quite stable and moving along the trend line. Not cheap or expensive at this moment.

·        I guess the up-side will be very much limited due fear of US “tapering “  tantrum and also possible rising interest rate due to stronger inflation.

·        But in view of weaker job data and P.M.I, I guess US / FED may not be in hurry to raise the interest rate, some said may be due to the political reason, as the government will need to pay huge amount of money as interest if rate going up due to huge amount of debt increase during the pandemic.

·        I think REIT may perform better than STI as I don’t think FED will raise interest rate soon even after completing the “tapering” programme.



·        HSI is down by -8.48% YTD and almost -20% from the highest this year ( 31,183 ) achieved in Feb 2021

·        So HSI is technically in a “Bear “ market mood now with the decline of more than -20%

·        With the continuous crackdown on Tech and property stocks, I think HSI will continue in downward pressure for quite some time.

·        If you believe in the HK market and Tech stocks recovery eventually, the current level of -0.5SD might be a good entry point (since the probability of winning the game is around 92%).

·        The -1SD (21,709) could be the strongest support trend line for the past 27 years.

·        If you don’t want to have the kind of huge volatility like the Tech ETF (3067) and still wanted to participate (bet on) some in Tech sectors, you may try the HSI Index ETF ( Tracker Fund 2800 ), which have around 25% in the Tech sector in their holdings ( like Tencent/ Alibaba/Meituan/Xiomi/BYD etc).

·        Tracker Fund 2800 also have a dividend yield of around 3% (TTM) while waiting for recovery.

·        But remember that there is still almost -15% to reach -1sd, you may need to buy in tranches as we don’t know when the market will reach the bottom before it recovers.

·        Although I already have 15 stocks out of the 60 in the holding, I have also started to accumulate some Tracker Fund 2800 to reduce the volatility in my portfolio as this ETF having a mixture of "old economy" and growth/tech" stocks.

·        Remember, regression to mean is like “pulling a rubber band”, the harder you pull it and away from “mean line “, the stronger it reverting back eventually. 













Congratulation !! to those invested in the US market as it easily out-perform any of Asian Market in the past 10 years.

But again, I think the extraordinary performance is mainly concentrated to just a few $ trillion “ mega-cap” stocks, like the 5 FAAMG contributed around 23% of S&P500 weightage.

 

Components of the S&P 500

#

Company

Symbol

Weight

      Price

Chg

% Chg

1

Apple Inc.

AAPL

6.160825

   145.75

-0.31

(-0.21%)

2

Microsoft Corporation

MSFT

6.067927

   299.69

-0.18

(-0.06%)

3

Amazon.com Inc.

AMZN

3.9471

   3,456.50

-6.02

(-0.17%)

4

Facebook Inc. Class A

FB

2.359494

   363.05

-1.67

(-0.46%)

5

Alphabet Inc. Class A

GOOGL

2.280477

   2,812.00

-4.00

(-0.14%)

6

Alphabet Inc. Class C

GOOG

2.17008

   2,825.99

-3.28

(-0.12%)

 

The S&P 500 now is top-heavy in 5 big tech stocks but that alone won’t end this bull market< source: Marketwatch.com>


Which is good? The “Winner take all society ” or “ Common Prosperity”?

You decide and I think only time will tell which is good or bad.   :D

 

Cheers !! 


Stay Healthy & Stay Safe!

 

 

STE

 





Comments

  1. Your article is always such an inspiration for folk like us who invest for income. Thanks

    ReplyDelete
    Replies
    1. Hi GlobalPassiveIncome,
      Thank you for the compliment ! hope you also "huat" in collecting your dividend /passive income ! :D
      Cheers !

      Delete
  2. Great achievement on slow and steady - Dividends only go up!
    It is 2 x 1M65. Congratulations!

    ReplyDelete
    Replies
    1. Thanks Uncle CW8888, for 1M65 is very much different as CPF is almost risk free...only the regulatory risk of adjusting the interest rate ...for equity , is much more volatile and some may not be able to take it.. like recent HK market .... :C
      Cheers !

      Delete
  3. Dear Sir
    Was waiting to hear from you after this long gap and what an illuminative and eye opening article for us. Thanks very much
    Your investing style is similar to mine and I was surprised to see that you had the same view regarding SG being good only for the 3 banks and REITS. I am also monitoring HK 2800.
    Great to see your passive income figures soaring
    Regards
    Garudadri

    ReplyDelete
    Replies
    1. Hi garudadri,
      Thanks for the compliment ! Hope you have great year and good dividend income this year.
      For HKG market , I think is going to be very volatile for next two weeks ...have noticed that short selling vol is extremely high during this max pessimism period and also partly due to lack of North/south bound fund flow due to holidays. Volatility might increase during long China National day holidays. Position sizing will be very important in buying HKG stocks at this point of time.
      Cheers !

      Delete
  4. Am speechless 🙊 with your dividend numbers. Congratulations Sim.

    ReplyDelete

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