Sunday, February 26, 2012

My investment strategy

I am a dividend investor. My strategy is to buy good paying dividend stocks or reits, keep them for a very long period of time while receiving dividends over a period of time. The dividends received are then accumulated and reinvested into the dividends stocks again. I have divided my holdings to different groups as follows:

1) REITs
This is one of my biggest investment allocation. REIT stands for real estate investment trusts. REITs invest in and own properties. The rental earned from these properties are then distributed to unit holders as income distributions. In Singapore, REITs have to pay out at least 90% of their rental income. Due to this, the income distribution income is quite attractive. REITs can be categorized by the property type (E.g. industrial, retail, commercial). 

Based on, the average yield for REITs is currently 7.4%. Industrial REITs typically give higher return. One of my favorite is AIMs REIT; it is currently giving the highest yield of around ~9.7%.

frequency of payout
Most of the REITs payout are on a quarterly basis. Some of them payout on a half yearly basis. I do prefer those that payout on a quarterly basis as semi-annual ones tend to have bigger price fluctuations.

Though the correct name for the payout is "income distributions", many people including myself call them "dividend" like other stocks.

2) Blue Chips
Some blue chips do give very decent and consistent returns. They have strong fundamentals and are less likely to default. Also, there's a higher chance of the price increasing over a longer period of time. Dividends are also expected to increase as their earnings increase.

Examples of such blue chips are
a) Singtel
Singtel gave a total dividend of $258 per lot of dividend in 2011. Based on the last done price of 3.12, this is a 8.2% yield. In 2011, Singtel gave out a special dividend which boosted the yield. So we should be looking at other years where there is no special dividend given.
In 2010, Singtel gave out $142 per lot. This will translate to a 4.55% yield. Though it is much lower, it is still much better than the interest rates on saving accounts banks are currently offering.
b) St Engineering
St Engineering gave out a total of $145.50 of dividend in 2011. Based on the last done price of 3.13, it is a yield of 4.64%. For the year of 2012, a dividend of $125 has just been declared. This is an increase from the $115.50 for the same period as compared to the previous year.

c) SPH
SPH gave out $240 of dividends in 2011. This is a yield of 6.4% based on its last done price of $3.74. Other than its high yield, another thing I like about SPH is its monopoly business.

3) Fixed income
I will lump preference shares and bonds here. Preference shares and bonds can give regular dividends on a typical half yearly basis. If there is a need to sell them for cash, I could also do this in the open market. The yield may not be as high as the REITs or blue chips, but these counters are safer in nature and are less volatile in prices.

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