Republished from ThumbtackInvestor's blog with permission. The investor, a Singaporean in his mid-30s, has a portfolio valued at just over S$1 million. 

With the end of 2016, I can now update my long term record of dividends:

23/5/2012 Asia Enterprise Holdings $945.00
11/6/2012 Wells Fargo $195.70
16/7/2012 Tesco $1,771.64
17/8/2012 Metro Holdings $6,000.00
22/8/2012 Boustead $1,800.00
12/12/2012 Boustead $2,000.00
28/12/2012 Tesco $1,799.93

20/5/2013 Apple $528.00
20/5/2013 Hock Lian Seng $1,800.00
28/5/2013 Sing Tao $1,257.46
24/6/2013 Flyke International $415.00
1/8/2013 Metro Holdings $8,000.00
20/9/2013 Sing Tao $1,515.00
20/11/2013 Lion Teck Chiang $1,300.00
12/12/2013 Boustead $1,039.60

19/02/2014 Hopewell Holdings $393.00
22/05/2014 Hock Lian Seng $10,610.00
10/6/2014 Lion Teck Chiang $2,376.00
18/7/2014 ICBC $14,034.00
12/08/2014 Metro Holdings $20,900.00
18/08/2014 King Wan $14,900.00
09/12/2014 King Wan $6,930.00
23/12/2014 Tesco $471.56

28/01/2015 Boustead scrip dividend (15,189 shares)
21/05/2015 BBR Holdings $13,568.00
21/05/2015 Hock Lian Seng $39,880.00
22/05/2015 CDW Holdings $3,661.81
12/06/2015 LTC Corporation $2,376.00
26/06/2015 Dutech Holdings $2,509.65
11/08/2015 Metro Holdings $20,880.00
18/08/2015 King Wan $9,900.00
20/08/2015 Boustead Singapore $1,012.64
15/09/2015 Libra Group $454.00
18/09/2015 CDW Holdings $2,811.60
02/10/2015 Restaurant Brands International $292.00

05/01/2016 Restaurant Brands International $177.12
27/01/2016 Boustead Singapore dividend in specie (BP) NA
20/05/2016 BBR Holdings $6,930.00
20/05/2016 Hock Lian Seng $18,630.00
30/05/2016 CDW Holdings $3,787.94
24/06/2016 Dutech Holdings $5,643.00
17/07/2016 Libra Group $635.60
19/08/2016 Boustead Singapore $1,025.52
23/09/2016 CDW Holdings $489.41
22/11/2016 LTC Corporation $2,176.02
09/12/2016 King Wan $4,950.00
09/12/2016 Boustead Singapore $256.38

2016’s total dividends received in reality, should be somewhat higher as I did not include the Boustead Project shares received as dividend in specie. That works out to be a few grand.

For 2016, approximately $4,000/mth in dividends is reasonable. Not fantastic, but not too bad either. Can’t complain too much about it.

2014 and 2015 had unusually high dividends (as a proportion of the total portfolio value) due to the use of leverage. The leveraged amounts are obviously backed out from the total portfolio value for it to be an accurate representation, but this leverage does still generate dividends, which explains for the unusually high amount of dividends.

LQM ad141eGoing forward for 2017, without leverage, I’d expect the total portfolio dividend amount to stabilize around the $55-60k+ mark, based on a portfolio amount of just over $1mil, which works out to be a yield of approximately 5%+. This is pretty ok considering that I do not particularly seek out high yielding counters like REITs, instead, preferring to focus on value situations.

Going forward for 2017, without leverage, I’d expect the total portfolio dividend amount to stabilize around the $55-60k+ mark, based on a portfolio amount of just over $1mil, which works out to be a yield of approximately 5%+.

This is pretty ok considering that I do not particularly seek out high yielding counters like REITs, instead, preferring to focus on value situations.

I’m expecting the total portfolio value to grow more rapidly in 2017, probably around the $1.3mil – $1.5mil mark by this time next year.

Largely because I’m optimistic about my performance in 2017. But then again, I’m optimistic every year anyway. :)

♦  Higher interest rates and mortgage rates, house-hunting, etc 

The general market is expecting 2017 to be a year of increasing interest rates worldwide. I don’t think there is much opinion that strays from this theme. There is some debate though, regarding the pace of such interest rate increases.

My own opinion is that it’d be similar to 2016: We’d see 1 or 2 rate increases for 2017 but no more. And that’s lesser than the consensus currently. The markets are expecting much more rapid rate increases for 2017.

My other general opinion (that’s not really substantiated or researched!) is that the rate rises means that going forward, it’d be an increasingly tough environment for REITs as an asset class. 

In fact, any asset class that behaves like fixed income (bonds) will not do so well in such an environment. That’s an opinion that Bill Miller has as well:

Anecdotally, it seems to me that in the local context, REITs are over-invested as an asset class. Again, I’d emphasize this is just an unsubstantiated vibe without any of the extensive research SG TTI has come to be known for.

It’s just that when talking to anyone who has any form of investments in the equity markets, I’ve not come across anyone WITHOUT any exposure to REITs at all, and in fact, several have almost exclusively invested in REITs.

I’d be a bit more cautious in this regard. But then again, I haven’t had  much any experience with REITs, aside from my brief research when I was comparing Centurion Corp’s potential divesting into a REIT, compared to other REITs (Centurion Corporation Investing Thesis Part III)

Also, I’m talking about general themes here, not specific companies. Of course, even within a sector that is facing a tough environment in any 1 year, one would still be able to find a few companies/REITs that still perform very well.

With rising interest rates, I’m expecting mortgage rates to rise as well. Coupled with a tough employment scene locally, this is the perfect toxic environment for the property sector in 2017.

It’s weird to use “perfect” together with “toxic”, but that’s exactly what it is for someone hunting for another property. Like most people, I am servicing a mortgage currently, so I am affected as well by rising rates. Yet, like all potential buyers, I’m cheering each time the quarterly real estate index shows a new drop.

Talk about mixed emotions.

Singapore’s unemployment rate has steadily rose and it’s now at 2.1%, the highest since the 1st quarter of 2014. It’s hard to find positives in this regard for 2017. I don’t think it’s going to improve.

I’m sure many business owners and/or management would agree with me. Most of us have a front row seat to the general singapore economy. When economic conditions deteriorate, the business owners are the 1st to notice it, way before the actual economic data confirms it.

So that means there’d be more defaults, more firesales, more negative sentiment. When your job and the resulting cashflow is threatened, the very last thing you’d have on your mind is committing to big money liabilities like property.

I think I’d be able to find some deals in this regard.

I’ve always said that property buying is like big game hunting with a single bullet. You got only 1 shot at any 1 time, so you’ve to make that count.

It’s no good having 10 “not too bad” or “almost firesale” options. It’s much better to have 9 “non firesale, poor” options and just 1 excellent option which is a deep firesale, and fulfills all your needs.

From the recent emails I’ve received, some of you have also indicated that you’re looking out for deals in the property sector, so I guess I’m not alone.

Quick tip if you don’t already know this: For couples who intend to own an investment property, put 1 of the property solely under your own name and the other solely under your spouse’s name. Not Joint owners.

This allows you to avoid paying for ABSD as each property is then considered as the “1st property”. If both of you are joint owners of the 1st property (as is normally the case), then the 2nd is considered as the 2nd property for both of you and thus is liable to all the related additional taxes.

Of course, this means that your eligible loan quantum is much lower as only the earning power of the single owner is considered by the bank. I think it’s a good exercise to help you not over stretch anyway. So it’s not a bad thing.

If for whatever reason, you do still need to have both spouses named as owners of the 1st property, you can also proportion it such that 1 spouse owns 99% of the property, while the other own 1%.

If you need to convert to sole ownership in future, the 1% spouse just has to sell his/her 1% to the other spouse based on the valuation sum. The related taxes are all based on the sale quantum, so at only 1%, the costs will be very reasonable.

Although perfectly legal, I think this is somewhat frowned upon though as a way to get around the rules, so I shan’t espouse too much about it here.

Also, TTI accepts no responsibility if your spouse decides to run away with the 100% ownership of the property in future… (hahaha. Always consider black swan events…)

In my next post, I’d probably go back to doing another deep value analysis so stay tuned…

Here’s wishing all readers of SG TTI a fruitful start to 2017.

May we all thrash the markets in 2017.

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